Federal Reserve Governor Lisa Cook laid out an economic outlook on July 15 that amounts to a conditional optimism: disinflation could happen, but a lot of things need to go right first. And if they don’t, she’s ready to hike rates.
The inflation picture is stubborn
The 12-month PCE inflation rate was near 3.7% in June 2026. The Fed’s target, as always, is 2%. That’s not a small gap. It’s nearly double the goal, and it’s persisting despite the Federal Open Market Committee holding the policy rate steady at 3.50%-3.75% as of its June meeting.
Core goods prices have been climbing at a 5% annual pace since the start of the year. Cook pointed to prior tariffs as one source of price pressure, suggesting their effects may be fading, which could open a path toward disinflation.
Cook flagged several forces that could keep inflation elevated. Continuing conflict in the Middle East, particularly the situation involving Iran, threatens oil price stability.
