Federal Reserve Governor Lisa Cook said Tuesday that the central bank still sees a path for inflation to keep cooling, but she flagged three big threats that could stall progress: new tariffs, a surge in artificial-intelligence investment, and rising geopolitical tensions. Her remarks, delivered at a conference in Washington, offered a nuanced take on an economy that has been surprisingly resilient — and stubbornly pricey.
The disinflation outlook
Cook described the recent inflation data as encouraging. After a bumpy start to the year, price pressures have eased, and she believes the trend could continue. “I see the potential for further disinflation,” she said, pointing to cooling labor markets and moderating consumer demand. But she stopped short of declaring victory. The Fed’s preferred inflation gauge, the personal consumption expenditures index, still sits above the 2% target, and Cook made clear that the committee is not ready to cut rates yet.
Tariffs and trade risks
The governor singled out trade policy as a wild card. New tariffs on imported goods, she warned, could push up prices for businesses and consumers alike. “If tariffs are broad and sustained, they could feed into higher inflation,” Cook said. That would complicate the Fed’s job, forcing it to keep rates higher for longer. She noted that the full impact of recent tariff announcements has not yet shown up in the data, leaving policymakers in a wait-and-see mode.
AI spending and productivity
Another risk comes from the boom in artificial-intelligence investment. Companies are pouring billions into data centers, chips, and software. Cook acknowledged that AI could eventually boost productivity and lower costs, but in the short run, the spending itself is adding to demand. “If investment outpaces the supply of goods and services, that could be inflationary,” she said. The Fed is watching whether the AI buildout creates bottlenecks or simply expands the economy’s capacity.
Geopolitical uncertainty
Cook also pointed to conflicts in Ukraine and the Middle East as sources of potential supply shocks. Disruptions to energy or food markets could reignite inflation just as it seems to be fading. She said the Fed has to remain “alert and flexible” because geopolitical events are inherently unpredictable. The central bank’s baseline forecast assumes no major escalation, but Cook stressed that the risks are tilted to the upside for prices.
Her comments come ahead of the Fed’s next policy meeting in September. Most investors expect the central bank to hold rates steady, but the debate inside the committee is far from settled. Cook’s warning suggests that even if inflation keeps falling, the path to rate cuts will be bumpy — and the biggest obstacles may come from outside the Fed’s control.
