Clash with the White House on interest rate cuts? Federal Reserve Powell: Defending inflation credibility is the top priority.

Federal Reserve Governor Lisa Cook said that the Fed must bring the inflation rate back to the target level in the near future, which is crucial for maintaining its credibility. "Unless I see stronger evidence that inflation is consistently falling back to the target level, this will continue to be my focus - of course, assuming there are no unexpected changes in the labor market," Cook said in a speech prepared for an event in Miami on Wednesday. Last week, the Fed's decision-making body kept the benchmark interest rate unchanged in the range of 3.5% to 3.75%, following three consecutive rate cuts by the end of 2025. While staying put, officials revised their assessments of the economy and labor market and signaled that there is no immediate need for further rate cuts. Cook's remarks come as President Trump announced the nomination of former Fed Governor Kevin Warsh as the next Fed Chairman. Trump has long demanded significant rate cuts from the Fed, a move that has raised concerns among many observers that the next chairman may struggle to uphold the Fed's commitment to controlling inflation. Warsh had previously stated that the Fed has room to cut rates, citing his belief that productivity improvements can promote economic growth without raising inflation. Cook expressed her support for the decision to keep rates unchanged last week, as she currently believes that the "risk is tilted towards inflation moving up." She is aligned with several other cautious policymakers who have expressed concerns about inflation being above the Fed's 2% target for several years. "After experiencing inflation above the target for nearly five years, it is imperative that we return to a deceleration path and achieve the target in the relatively near future to defend our credibility," Cook emphasized. She pointed out that the labor market's lack of vigor "could make it vulnerable to downside shocks," but still described the market as "roughly balanced" and noted signs of stabilization in the slightly decreased unemployment rate in December. "Overall, uncertainties in the economic outlook remain high, but I believe that the three rate cuts last year will continue to provide support for the labor market," she concluded.