Fed’s Cook sees inflation moving to target without much rise in unemployment

Fed Board of Governors member Lisa Cook stated: “Soft landings are not unprecedented. When such a landing occurred, on average it was associated with a smaller preceding policy tightening. Soft landings were also more likely when policy easing began with inflation already close to target and when there was a relatively firm growth backdrop. In the U.S., what I have seen so far appears to be consistent with a soft landing: Inflation has fallen significantly from its peak, and the labor market has gradually cooled but remains strong. Of course, I am closely monitoring incoming data to see how the economy further develops. It is possible that some features of the recent inflation episode may make a soft landing more likely in countries around the globe. As I discussed, Bernanke and Blanchard found that much of the inflation episode came from relative price shocks and sectoral shortages that have since been resolved. And while they found that tight labor markets have since taken over as the main drivers of inflation, there are signs that such tightness is easing. For instance, in the U.S., the ratio of vacancies to unemployment has fallen back to its pre-pandemic level and the rate of voluntary quits has declined, as workers are less confident of finding a better job. Thus, my baseline forecast (and that of many outside observers) is that inflation will continue to move toward target over time, without much further rise in unemployment.”