Fed’s Lisa Cook Sees Trump Tariffs Raising Inflation, Stressing Labor Market

Federal Reserve Governor Lisa Cook expressed concerns that President Donald Trump’s tariffs could push up inflation and reverse the recent lower readings.

According to a CNBC report, in a speech delivered at the Council on Foreign Relations in New York, Cook said the post-COVID experience with inflation could mean high prices could linger for longer than otherwise expected.

“The recent post-pandemic experience with high inflation could make firms more willing to raise prices and consumers more likely to expect high inflation to persist,” she said.

According to data released by the Commerce Department last week, the Fed’s preferred gauge, the Personal Consumption Expenditures (PCE) Index, rose 0.1% in April, taking the annual inflation rate to 2.1%.

While inflation has stayed above the Fed’s 2% target, Cook said progress has been made in this regard.

But Trump’s tariffs could reverse the course, she warned.

“I do not express views on the administration’s policies. But I do study the economic implications, which appear to be increasing the likelihood of both higher inflation and labor-market cooling,” she said, pointing to the possibility of stagflation in the U.S. economy.

Cook also expressed concerns that Trump’s tariff-induced price rises could make it tough for the Fed to achieve its inflation goal and make policy setting difficult.

Like many of her peers, Cook also maintained that the Fed’s wait-and-watch policy best suits the current uncertainty in the U.S. economy.

“I see the U.S. economy as still being in a solid position, but heightened uncertainty poses risks to both price stability and unemployment,” she said.

Meanwhile, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500, was up 0.43% at the time of writing.

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