Federal Reserve Governor Highlights Increased Uncertainty in U.S. Economic Outlook

The latest insights from Federal Reserve Governor Lisa D. Cook underscore that while the U.S. economy retains underlying strength, it now faces a period of elevated uncertainty and evolving risks.

Governor Cook detailed that the economic landscape has shifted notably since the start of 2025. Unemployment remains low, with the jobless rate steady at 4.2 percent, and inflation has retreated from pandemic highs but still sits slightly above the Federal Reserve's 2 percent target. The impacts of recent trade policy changes are becoming more pronounced, contributing to inflationary pressures and a potential cooling in the labor market. As a result, monetary policy officials must navigate a careful balance between the goals of price stability and maximum employment, especially given recent increases in short-term inflation expectations and a moderation in hiring and business investment plans.

She pointed out that growth in U.S. gross domestic product has slowed, manufacturing output and business sentiment have weakened, and private sector activity, though still solid, has softened. These economic headwinds—compounded by persistently high uncertainty—are challenging for policymakers determining the path of interest rates. Governor Cook emphasized the need for vigilance and flexibility in monetary policy, noting that the Federal Reserve's current stance allows for adaptation as new data emerge.

Beyond the domestic outlook, Cook drew lessons from the post-pandemic global recovery. She highlighted how quickly inflation can shift in response to large shocks and stressed the importance of credible inflation targeting by central banks as a means to anchor long-term expectations, lessons which proved vital in the recent economic cycle. By applying these insights, she reaffirmed her commitment to policies that balance both sides of the Federal Reserve's dual mandate, especially during periods of heightened uncertainty.

Amid shifting trade dynamics and persistent inflationary challenges, the outlook signals that vigilance and adaptability will be key for policymakers to support economic stability in the months ahead.