S&P 500 falls on pressure from retail stocks, weak jobless claims
Investing.com -- In a recent speech at the Council on Foreign Relations, Federal Reserve Governor Lisa D. Cook shared her views on the current state of the U.S. economy and the path of monetary policy. Cook revealed that while the U.S. economy remains solid, there is increased uncertainty since the start of the year.
According to the latest data, unemployment continues to be low, while inflation is above the Federal Open Market Committee’s (FOMC) 2 percent goal. Cook also noted that changes in trade policy are beginning to impact the economy. These changes are increasing the likelihood of both higher inflation and a slowdown in the labor market.
Inflation has declined from its pandemic highs but remains above the target. Data shows that inflation was 2.1 percent for the 12 months ending in April and 2.5 percent when excluding food and energy costs. Price increases tied to changes in trade policy may make it difficult to further reduce inflation in the near term.
On the employment front, the labor market has remained resilient with the unemployment rate in April steady at 4.2 percent, a historically low level. However, changes in trade policy could affect hiring plans in the near future and have a negative effect on U.S. productivity.
In terms of overall economic activity, U.S. GDP moved lower in the first quarter after solid growth last year. Cook anticipates a slowdown in the expansion of economic activity from last year’s pace due to the uncertain level of tariffs. Manufacturing output declined in April, and firms reported a drop in capital expenditure plans for 2025.
Despite the solid state of the economy, the economic environment could become challenging for monetary policymakers. At the most recent policy meeting, Cook supported the FOMC’s decision to leave the policy interest rate unchanged. She stated that the current stance of monetary policy is well-positioned to respond to a range of potential developments.
Cook also highlighted the importance of studying cross-country experiences during the pandemic recovery. She pointed out that the inflation environment can change abruptly, especially in a world with global shocks. She emphasized that credible inflation targeting is essential to keep longer-term inflation expectations anchored.
In conclusion, Cook stated that she sees the U.S. economy as still being in a solid position, but heightened uncertainty poses risks to both price stability and unemployment. She emphasized the importance of monitoring developments closely when considering monetary policy decisions.
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