Fed Governor Cook signals readiness to raise rates, joining hawkish camp

Federal Reserve Governor Lisa Cook signaled a hawkish shift Wednesday, saying she stands ready to raise interest rates if necessary. Her remarks, coming from a policymaker who voted to hold rates steady at last month's FOMC meeting, suggest the Fed's tightening camp is regaining momentum.

Speaking at a public event in Anchorage, Alaska, on Wednesday, Cook said inflation "remains unacceptably high" and that, of the Fed's dual mandate, the risks to price stability currently outweigh those to employment.

"While I would weigh the negative effects of a rate increase on the labor market and economic growth, I would support raising rates if that is what is needed to bring inflation down," she said.

Cook voted with the majority at the July 29 FOMC meeting to hold the benchmark interest rate at 3.5 to 3.75 percent, but her remarks Wednesday were widely interpreted as leaving the door open to joining the rate-hike camp should inflation fail to ease.

However, she identified several variables that could shape the inflation outlook — including whether the impact of tariffs fades, the severity of energy supply shocks from the Iran war, and the pace of AI infrastructure investment — and suggested that if those pressures subside, inflation could ease as well.

Neil Kashkari, president of the Federal Reserve Bank of Minneapolis and one of the Fed's most prominent hawks, also doubled down on the case for further rate increases the same day.

In a CNBC interview, Kashkari said "now is the right time to raise rates gradually," adding that corporate earnings remain solid and that consumer spending and the labor market are both holding up. "I keep asking myself: what is the evidence that current monetary policy is particularly restrictive?" he said.

At last week's FOMC meeting, he voted against holding rates steady, joining Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan in pushing for a rate increase.

Markets are now watching closely for signs that the Fed's policy stance could tilt back toward tightening, particularly after Cook — previously seen as outside the hawkish minority — publicly raised the possibility of a rate hike.

With the Fed reaffirming that inflation remains its foremost concern, upcoming price and employment data are expected to be the key variables shaping any further rate decision.