Cook warns inflation risks now outweigh employment concerns

Target inflation reached 3.7 percent in June 2026, remaining 1.7 percentage points above the Federal Reserve's target after more than five years of elevated readings.

Core goods prices accelerated at a 5 percent annual pace, proving that recent inflation stems from broader pressures rather than energy alone.

Two unexpected shocks—the Middle East conflict and massive capital spending on artificial intelligence infrastructure—have pushed prices higher.

Companies have announced over $1.5 trillion in data center plans, driving sustained demand for chips, equipment, and utilities.

Meanwhile, unemployment held steady at 4.2 percent in June, leading Governor Cook to conclude that inflation risks now clearly outweigh employment risks.

One year prior, FOMC officials faced weakening growth forecasts of 1.4 to 1.6 percent and chose to keep interest rates steady as risks to the dual mandate appeared balanced.

Economic output has since proven unexpectedly resilient, with GDP growing 2.0 percent in 2025 and projected to reach 2.2 percent in 2026.

Annual labor productivity growth has risen to 2.5 percent over the past two years, supported by data center construction.

While long-term inflation expectations remain anchored, persistent supply shocks threaten to embed higher prices into future wage and pricing decisions.