Federal Reserve Governor Lisa D. Cook told an audience on August 5 that inflation is still too high and that she stands ready to support higher interest rates if progress toward the central bank’s 2 percent target stalls.
Cook described the U.S. economy as resilient and growing at a solid pace. She noted that inflation has stayed above the Federal Open Market Committee’s goal for more than five years. The personal consumption expenditures price index rose 3.7 percent in the 12 months through June, nearly double the target. Core prices, which exclude food and energy, climbed 3.3 percent over the same period.
She pointed to two unexpected sources of pressure this year. The conflict in the Middle East has kept energy costs elevated. At the same time, companies are spending heavily to expand artificial intelligence infrastructure, lifting prices for semiconductors, high-tech equipment, software and utilities. Those forces, she said, have shifted the balance of risks toward inflation and away from the labor market.
The job market remains stable in what Cook called a low-hire, low-fire environment. The national unemployment rate stood at 4.2 percent in June, little changed from a year earlier. Job gains averaged more than 100,000 a month from April through June. Initial claims for unemployment benefits continue to run at historically low levels.
After adjusting for inflation, output grew at a 1.8 percent pace in the first half of the year and appears on track for a faster rate in the second half. Business investment rose at a 10 percent annual rate, driven in large part by AI-related spending. Consumer spending advanced near 2 percent, while residential investment edged down about 3 percent.
Cook said she views risks to the inflation side of the dual mandate as higher than risks to employment at this stage. “As such, I am prepared to act by raising rates, if necessary,” she said. She noted that some disinflationary forces are already at work, including the fading effects of last year’s tariffs, the possibility of lower oil prices later this year, and eventual easing of AI-related goods-price pressures as supply chains adjust. For now she has preferred to hold rates steady and watch how those factors develop. If clear signs of continued disinflation do not appear soon, she is prepared to support an increase.
Turning to Alaska, Cook observed that the state shares the national struggle with higher living costs while facing its own distinct challenges. The unemployment rate here was 4.4 percent, lower than any pre-pandemic reading. Health-care employment has been a steady source of gains, while federal government jobs, a larger share of the workforce than in most states, have declined. The working-age population edged lower in 2025 even as the number of residents 65 and older rose 3.2 percent.
Oil and gas remains a major force in the Alaskan economy. When energy prices rise, the state government’s fiscal position improves, yet households in remote communities often see their own energy bills spike. Cook said that tension is something policymakers must keep in mind when assessing the broader effects of energy-price swings.
She closed by addressing the gap between solid economic statistics and the more cautious views she hears from workers and business leaders. Consumer sentiment has lagged what a stable labor market would normally suggest. Cook attributed the weakness to three factors: uncertainty about how AI will reshape jobs, long-running structural pressures such as housing, education and health-care costs that have outpaced wages, and the lasting impact of five years of elevated inflation.
“If you take away one thing from this talk, I hope it is that I am firmly committed to restoring price stability,” she said. Bringing inflation back to target, she added, is the most important step the Federal Reserve can take to deliver relief to families and to close the disconnect between official readings and the everyday experience of many Americans.
