Federal Reserve Governor Lisa D. Cook delivered a hawkish economic assessment on August 5, 2026, warning that inflation remains unacceptably elevated and signaling that the Fed stands ready to raise interest rates if disinflation fails to materialize in the near term. Speaking at the 2026 Economic Luncheon of the Anchorage Economic Development Corporation in Anchorage, Alaska, Governor Cook painted a picture of an economy that is resilient but under persistent price pressure.
In her remarks, Cook stated plainly that inflation is too high, noting that the personal consumption expenditures (PCE) price index rose 3.7 percent in the 12 months through June, nearly double the Federal Open Market Committee's 2 percent target. She added that inflation has exceeded the FOMC's target for more than five years. Core PCE, which excludes food and energy, rose 3.3 percent over the same period.
Cook cautioned against placing excessive weight on a single data point, describing the current environment as highly uncertain. The Governor identified two unexpected sources of inflationary pressure that have emerged this year. First, the ongoing conflict in the Middle East has driven energy prices significantly higher, contributing materially to overall inflation.
Second, a surge in capital spending tied to artificial intelligence infrastructure buildout has lifted prices for semiconductors, high-tech equipment, software, and utilities. Cook stated that these developments have collectively shifted the balance of risks toward inflation and away from the labor market. On monetary policy, Cook said she is prepared to act by raising rates if necessary, though she outlined three forces that could bring inflation down without a rate increase.
She noted that the inflationary effects of tariffs announced last year are largely behind us, and that their removal from the 12-month inflation window should provide some disinflation going forward, even as the exact path of tariff policy remains uncertain. She also pointed to expectations among many forecasters that oil prices will decline by year-end, providing additional deflationary relief, though she again flagged significant uncertainty. Finally, she expressed confidence that supply chain adjustments and sector-specific efficiency gains from the AI investment wave will eventually ease goods price pressures.
Cook stressed, however, that the window for patience is narrowing. She warned that with five years of above-target inflation, the risk grows that elevated inflation may become entrenched in price- and wage-setting behavior, leading to a persistence that would be far harder to reverse. Regarding the labor market, Cook described conditions as stable, characterized by a low-hire, low-fire equilibrium.
The national unemployment rate stood at 4.2 percent in June, roughly unchanged from a year earlier and broadly in line with what many economists consider the natural rate of unemployment. Job growth picked up in the spring, averaging more than 100,000 jobs added per month in the April through June period. Initial unemployment insurance claims have trended at historically low levels for several years.
Cook acknowledged that the low hiring rate disproportionately affects new labor market entrants and noted that concerns about AI-related job displacement, while not yet materialized in the data, remain a significant risk. On overall economic growth, Cook said real output grew at a 1.8 percent pace through the first half of 2026, with a faster pace expected in the second half. Business investment rose at a 10 percent annual rate in the first half, driven in large part by AI-related capital expenditure.
Consumer spending advanced at close to a 2 percent rate, while residential investment edged down approximately 3 percent, continuing to represent a soft spot in the broader expansion. Turning to the Alaskan economy, Cook highlighted both similarities with and differences from the national picture. She noted that Alaska's unemployment rate stood at 4.4 percent as of the most recent Bureau of Labor Statistics data, a level lower than any pre-pandemic reading.
However, she flagged a notable decline in federal government employment, which constitutes a higher share of Alaska's workforce relative to most other states. She also pointed to demographic headwinds, noting that Alaska's working-age population, those aged between 18 and 64, declined slightly in 2025, while the population aged 65 or older increased 3.2 percent last year, citing data from the Alaska Department of Labor and Workforce Development. Cook drew particular attention to Alaska's oil and gas sector, where employment stood at 9,700 in June and which added a significant number of jobs in the past 12 months.
She described a structural tension unique to the state, whereby rising oil prices simultaneously strengthen the state government's fiscal position while imposing acute energy cost burdens on households, particularly in remote and rural communities. In a broader reflection on economic sentiment, Cook addressed a disconnect she has observed between official economic statistics and the outlook reported by workers and business leaders across the country. She identified three underlying drivers of weak consumer sentiment: uncertainty over AI's impact on the labor market and job availability; decades-long structural cost increases in housing, education, health care, and childcare that have outpaced wage growth; and the corrosive effects of five years of above-target inflation.
In Alaska specifically, Cook noted that house prices have increased fivefold since 1990, more than double the rise in the overall price index for goods and services over the same period. Cook concluded by reaffirming her commitment to restoring price stability, describing it as the most important contribution monetary policy can make to the well-being of American households. Her remarks were delivered in a personal capacity and do not necessarily reflect the views of her colleagues on the Federal Reserve Board or the FOMC.
Source: federalreserve.gov