Federal Reserve Governor Cook: The US labor market is robust, rate cuts should be more cautious.

Federal Reserve Governor Lisa Cook said on Monday that, given the strong labor market and recent fluctuations in inflation data, policymakers can adopt a more cautious approach when further lowering interest rates. Speaking at the 7th Law and Macroeconomics Conference in Ann Arbor, Michigan, Cook said, "Since September, the labor market has shown greater resilience, and inflation has been more stubborn than my original assumptions. Therefore, I believe we can proceed with further interest rate cuts more cautiously." The Fed lowered interest rates for the third consecutive time in December of last year, starting from September. Cook stated that these interest rate cuts "significantly reduced the restrictiveness of monetary policy." She added, "In the early stages of an accommodative policy, I tend to act more quickly, and then gradually slow down the pace as we approach the neutral interest rate." Cook expects that over time, policy rates will gradually move towards a more neutral stance. The neutral interest rate refers to a level of interest rates that neither promotes nor suppresses economic activity. Economic forecasts released last month indicated that Fed officials expect only two rate cuts by 2025. Fed Chairman Powell stated that the pace of rate cuts this year will depend on further progress in controlling inflation. It is widely expected in the market that the Fed will maintain interest rates at their current levels at this month's meeting. Cook believes that the U.S. economy will be in good shape by early 2025. She pointed out that the current labor market is strong, with relatively low unemployment rates and average wage growth exceeding inflation, indicating that the labor market is not a major source of inflationary pressure. Despite a noticeable slowdown in price growth in recent years, Cook stressed that "there is still a long way to go to achieve the 2% inflation target." She believes that inflation will gradually but unevenly return to the target level in a sustainable manner to achieve 2%. Cook also focused on financial stability issues in the United States in her speech. She stated that the U.S. financial system is "resilient and robust," but she also highlighted several potential risk areas that need attention, including private credit, stablecoins, cyber events, and the application of artificial intelligence. She specifically mentioned the potential risks of artificial intelligence in securities trading. Cook pointed out that generative artificial intelligence could be a powerful tool in executing trading strategies (such as trend trading), but it could also exacerbate market dynamics similar to events like the 2010 Flash Crash. "The sound condition of the financial system is consistent with the broader economic conditions, including a strong labor market and gradually easing inflation pressures."