Federal Reserve officials are signaling a highly flexible approach to monetary policy, with recent comments from Governor Lisa Cook and San Francisco Fed President Mary Daly underscoring a data-dependent stance amid evolving economic risks. Governor Cook, speaking at the Brookings Institution on Monday, emphasized that every U.S. central bank meeting is "live" for monetary policy adjustments, rejecting any notion of a preset path.
Cook explicitly supported the Federal Open Market Committee's (FOMC) recent decision to lower the target range for the federal funds rate by a quarter-point to 3.75%-4.00%, viewing it as appropriate given the heightened downside risks to employment. She noted that the current policy remains "modestly restrictive," a suitable position as inflation continues to hover above the Fed's 2% target. Cook also backed the decision to halt the reduction of the Fed's balance sheet.
On the inflation front, Cook expressed confidence that underlying inflation is trending toward the 2% target, with expectations remaining well-anchored. However, she cautioned that tariffs continue to add to price pressures, with their full impact still unfolding. Regarding the labor market, Cook described it as "still solid" but acknowledged it is cooling and being closely monitored for any signs of weakness. She linked slowing payroll growth to changes in labor supply.
Adding to the nuanced outlook, San Francisco Fed President Mary Daly echoed support for the recent rate cut and indicated an open mind regarding a potential further reduction at the December 9-10 FOMC meeting. Daly stressed the importance of balancing the Fed's dual mandate of cooling inflation and protecting jobs, noting that inflation is currently running around 3%. She highlighted that the 50 basis points of rate cuts implemented this year have better positioned monetary policy to address future economic developments.
Both officials acknowledged the challenges posed by the ongoing federal government shutdown, which is weighing on the economy and limiting the availability of fresh official economic data. Despite this, Cook asserted that policymakers are "not flying blind," relying on administrative sources, private-sector data, and Fed surveys to inform their decisions. She also projected that economic growth would rebound, fueled by AI-driven productivity gains.
Meanwhile, north of the border, Bank of Canada (BOC) Governor Tiff Macklem provided insights into Canada's economic landscape, particularly concerning the impact of U.S. tariffs. Macklem stated that while the BOC's monetary policy is providing some assistance to the economy, it has limitations in fully addressing the structural damage caused by these tariffs. He noted that most American companies are ultimately bearing the cost of U.S. tariffs, rather than Canadian firms. The Bank of Canada recently lowered its key interest rate to 2.25%, its second consecutive cut, aiming to keep inflation near its 2% target while supporting the economy through tariff-related disruptions.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.