Federal Reserve's Lisa Cook Foresees Swift Response To Unemployment Surge Following Jerome Powell's Testimony Before Congress: 'We Are Very Attentive'

Federal Reserve Governor Lisa Cook has emphasized the central bank’s readiness to act if the unemployment rate surges, in a recent statement.

What Happened: Cook, speaking at an event in Australia, highlighted the Fed’s vigilance regarding the unemployment rate, reported Reuters. She noted that despite the current 4.1% unemployment rate indicating a robust labor market, the situation could change rapidly, necessitating a responsive approach.

“The labor market is still robust,” Cook said. “But we are very attentive to what is happening with the unemployment rate … The situation could change very quickly and we would be responsive.”

Cook’s comments come amid a backdrop of ongoing discussions about the Fed’s potential response to economic indicators. Federal Reserve Chair Jerome Powell recently outlined the conditions under which the central bank might consider lowering rates during his testimony before Congress.

This included a clear picture of what needs to happen before the central bank lowers rates. Although inflation is part of the story, Powell reminded the committee that the Fed has a dual mandate that includes employment.

"I could also see us cutting … if we saw unexpected weakening in the labor market," Powell said.

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Why It Matters: Economists and experts are anticipating a drop in June inflation data, which is expected to be reported on Thursday. Wall Street economists predict that headline inflation will decline from 3.3% in May to 3.1% in June, year-over-year. Despite the expected drop, consumers continue to experience higher costs compared to past months and years.

Moreover, Mohamed El-Erian, Chief Economic Advisor at Allianz, noted that Powell’s recent remarks to the Senate Banking Committee were less reassuring about inflation compared to his previous statements to central bankers. El-Erian pointed out that Powell’s written statement characterized inflationary developments as having shown “modest further progress,” which was less optimistic than his earlier comments.

Investors are also closely watching the upcoming June Consumer Price Index report, which could influence expectations for a potential rate cut in September. Fed futures currently indicate a 71% chance of a rate cut at the Sept. 18 Fed meeting, with expectations of two rate reductions by the end of the year.

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Federal Reserve illustration created using artificial intelligence via MidJourney

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote