At the January Federal Open Market Committee (FOMC) meeting, the Federal Reserve chose to keep interest rates unchanged. Both Fed Governor Michelle Bowman (who is a voting member of the committee) and retiring Atlanta Fed President Raphael Bostic (who is not) have characterized the current U.S. economy as “resilient,” where annual inflation has stayed static, but above the Fed’s 2% goal, and the labor market is shoring up.
Despite that, though, consumer confidence remains low, as do perceptions of job availability. Consumer perception has a recursive effect on economic activity; if consumers believe the economy is in a bad or precarious place, they’ll be more likely to hold off making major financial decisions (such as a home purchase).
On Wednesday during a prepared speech and subsequent moderated talk at the Economic Club of Miami, Fed Governor Lisa Cook addressed this disconnect between data and sentiment.
Cook has been accused by the Trump administration of mortgage fraud, and the President attempted to use that to remove her from the Fed. The oral arguments at the Supreme Court indicated Cook’s firing was unlikely to proceed, but despite this being Cook’s first public appearance since, she did not comment on any legal proceedings.
During the Q&A, Cook was also asked about Trump’s nomination of Kevin Warsh to succeed Jerome Powell as Fed chair. She largely refrained from commenting, noting she does not personally know Warsh.
Looking at the economy, Cook, in her prepared remarks also described a “resilient” economy, pointing to growth in the second half of 2025, leveling off inflation and a labor market that has stabilized (with an unemployment rate that was 4.4% as of December 2025). As for why inflation is staying above the 2% benchmark, Cook argued it is a temporary bump in prices on core goods due to tariffs. She specifically pointed to disinflation in the housing sector, such as cooling rents, as a sign of this.
In discussing the “disconnect between (economic) sentiment and activity,” Cook explained how households are comparing the present to recent history. The past years have seen high inflation and an economy that has cooled down after previously “running hot.” Noting that costs such as education and healthcare, as well as household debt, have risen more than wages, Cook proposed that we might be experiencing a “K-shaped economy,” where the already well-off are comfortable but more vulnerable households are not.
Continuing on the discussion of employment, Cook talked about the impact of AI in both her prepared remarks and the Q&A; during the latter, she predicted that the technology will be both a “job creator” and “job replacer,” but the process of that happening will likely not be a straight progression from one to the other. She argued that AI will be useful in automating rote tasks, which will result in “real human features, the deep creativity, the deep thinking is what we’ll be left to do.”
As for inflation, Cook argued that the current economy risks higher inflation more so than an upset in the labor market, hence her voting to keep rates unchanged. She did characterize current monetary policy as “mildly restrictive,” but argued since rate cuts last year lessened restrictiveness, now is the time to wait and see.
“Until I see stronger evidence that inflation is moving back down to target, that is where my focus will be, in the absence of unexpected changes in the labor market,” Cook said.
For Cook’s full remarks, click here.
