Fed's Cook Says Ready to Back Rate Increase If Inflation Fails to Ease

Federal Reserve Governor Lisa Cook said on May 27, 2026, that she is prepared to support an interest rate hike if inflation does not slow as expected, underscoring officials' concern over persistent price pressures. Speaking at Stanford University, Cook noted that after five years of elevated inflation, she worries high prices are becoming embedded in business pricing and wage-setting. "If the expected disinflation does not materialize in a timely way, I stand ready to support a rate hike," she said. However, she still prefers to hold rates steady for now, expecting inflation to decline in coming months while the job market remains stable. Cook also flagged the AI investment boom as a potential new inflation source, pointing to rising costs for chips, high-tech equipment, and software, along with a roughly 5% increase in electricity and water prices over the past year. Separately, Minneapolis Fed President Neel Kashkari warned that inflation risks now outweigh labor market risks, with Middle East conflict possibly spreading inflation shocks globally. Investors await the April PCE report on May 28, with forecasts showing headline PCE near 4% and core PCE at 3.3%, the highest since 2023. The two-year Treasury yield held near 4%, higher than the Fed's policy rate, signaling market bets on a potential hike.