US Fed governor says a ‘soft landing’ is possible

Lisa Cook said a so-called “soft landing” was possible but not assured – Copyright GETTY IMAGES NORTH AMERICA/AFP Drew Angerer

The US Federal Reserve may be on track to bring down inflation while avoiding a damaging recession, a senior policymaker said Thursday. 

The Fed recently voted to hold interest rates at a 22-year high, raising hopes among investors that it can achieve a so-called “soft landing” while avoiding further rate hikes.  

But despite significant progress since last summer, inflation remains stuck above the Fed’s long-run target of two percent, causing disagreement among policymakers over the best route forward. 

“I believe that a soft landing is possible, with continued disinflation and a strong labor market, but it is not assured,” Fed Governor Lisa Cook told a conference in California Thursday, according to prepared remarks. 

“In setting monetary policy, we need to seek a policy stance that is sufficiently restrictive to bring inflation back to two percent over time,” she said.

She added that the risks were two-sided, “requiring us to balance the risk of not tightening enough against the risk of tightening too much.”

Cook’s policy chimes with some of her colleagues, but is at odds with the views of others, like fellow Fed Governor Michelle Bowman. 

“I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our two percent target in a timely way,” Bowman told a conference in Ohio earlier this month. 

Futures traders currently assign a probability of more than 99 percent that the Fed will vote to hold rates steady again at its next interest rate decision in December, according to data from CME Group.