Federal Reserve Governor Lisa Cook said Thursday that the conflict in Iran has altered the central bank's assessment of risks surrounding its mandate to achieve price stability and maximum employment, shifting the tilt toward inflation.
Speaking at an event hosted by the Yale School of Management, Cook said, "I see the balance of risks as being largely, on net, in balance, but I would argue that the inflation risk is greater right now as a result of the Iran war."
She warned that the ongoing hostilities could meaningfully affect inflation dynamics. Cook observed that the Fed had been approaching its 2% inflation objective, but that earlier tariff developments had already pushed inflation away from the target, and the Iran war has increased that divergence.
"The Iran war has put my concern on balance of risks more toward inflation," Cook said.
Turning to the labor market, the Fed governor characterized current conditions as in balance but "precariously so." She described employment dynamics as a low hire, low fire regime and noted that this pattern is particularly challenging for the youngest workers in the labor force.
Cook also said the Fed is closely following data on the impact of artificial intelligence on jobs, calling AI potentially transformative for labor markets. She emphasized that the central bank is monitoring these developments carefully as they could influence employment trends and wage dynamics.
Finally, Cook commented that uncertainty remains elevated, underscoring the difficulty of forecasting how geopolitical events and technological shifts will interact with inflation and employment outcomes.
Summary
Federal Reserve Governor Lisa Cook said at the Yale School of Management that the war in Iran has pushed her assessment of risks toward higher inflation, even as she views the labor market as balanced but fragile. She highlighted the low hire, low fire pattern that hinders younger workers and said the Fed is watching AI developments closely for their labor market implications. She also noted that uncertainty is elevated.