US Fed Governor: Trade Policy Has Affected the Economy, Current Interest Rates Are in a Good Position

On Tuesday (June 3) local time, US Fed Governor Cook stated that while the US economy remains robust, the Trump administration's trade policies are beginning to weigh on economic growth, and the current monetary policy provides a sound foundation for addressing various economic scenarios.

Cook, who participated in an event hosted by the Council on Foreign Relations on Tuesday, said, "I believe the US economy is still on solid footing, but rising uncertainty poses risks to price stability and employment."

"There are already signs that changes in trade policies are beginning to affect the economy," Cook said. "I expect the pace of expansion in economic activity to slow down YoY."

She linked trade policies to a decline in manufacturing output, a reduction in major factory orders, and businesses scaling back investments in the face of a highly uncertain outlook.

The market widely expects the US Fed to maintain its benchmark interest rate within the range of 4.25% to 4.50% at its June policy meeting. Since December last year, the US Fed has held rates steady at three consecutive meetings.

Many economists and some US Fed officials believe that inflation and unemployment may rise, further complicating the US Fed's policy outlook.

Meanwhile, the intermittent and erratic tariff policies of the Trump administration have also added to the complexity of monetary policy.

Cook said that trade policies "appear to have increased the likelihood of upward inflationary pressures and a cooling of the labour market." Nevertheless, she emphasized that the US economy remains fundamentally sound.

Cook did not express her preference for the direction of interest rate policy for the remainder of the year, merely stating, "The current monetary policy stance is already prepared to address a variety of possible scenarios."

Cook reiterated her commitment to keeping long-term inflation expectations stable. She added, "In assessing the appropriate path for monetary policy, I will carefully weigh the US Fed's dual mandate and recognize that price stability is an important prerequisite for achieving a strong labour market over the long term."

Cook also pointed out that under current circumstances, businesses may be more inclined to raise prices when setting them, as they have accumulated experience from the COVID-19 pandemic and its aftermath.