lisa d cook : economic outlook speech by ms lisa d cook, member of the board of governors of the federal reserve system, at the peterson institute for international economics, washington dc, 6 october 2022. * * * thank you, adam, and thank you to the peterson institute for inviting me to speak today. this is my first speech as a fed governor, and i am delighted to deliver it here, joining friends and colleagues from across my career, from academia to policymaking. 1 i would like to start with a discussion of the u. s. economy, including the implications of international developments, and then talk about my approach as a policymaker and how i view the current stance of monetary policy. the labor market i will begin with the labor market, which is very strong. employment rebounded much more swiftly post - pandemic than it did during previous recoveries and has continued to grow at a rapid pace of about 440, 000 jobs a month so far this year. the unemployment rate, at 3. 7 percent, remains very low. other indicators also point to labor market strength : despite a large drop in the number of job openings in august, which may suggest that labor demand is moderating, there is still an unusually high 1. 7 job openings per unemployed job seeker. meanwhile, layoffs are near historical lows, and the quits rate is well above pre - pandemic levels even as it has moderated somewhat, indicating that workers still feel confident they can find another job. on the supply side, labor force participation has recovered more slowly than expected and has largely moved sideways this year even after a welcome rise to 62. 4 percent in august. early retirements prompted by the pandemic have not yet reversed. some of these are likely due to fear of exposure to covid - 19. and covid continues to weigh on a full recovery in labor supply in other ways as well, as people with long - haul cases and caring responsibilities stay home and others lose hours to short - term illness. if the health impact of covid - 19 continues to diminish, i am optimistic that more workers will reenter the labor force, but there is a risk that labor supply remains below its prepandemic trend. inflation on the price stability side of the fed's mandate, inflation remains stubbornly and unacceptably high, and data over the past few months show that inflationary pressures remain broad based. my focus, therefore, is

rapid effects on commodity and other import prices, but monetary transmission through economic slack appears to affect inflation more slowly. i believe that uncertain times require a risk - management approach to policy - settinglooking not just at the expected outcomes, but also considering the most salient risks in setting the policy stance. in the current situation, with risks to inflation forecasts skewed to the upside, i believe policy judgments must be based on whether and when we see inflation actually falling in the data, rather than just in forecasts. although most forecasts see considerable progress on inflation in coming years, it is important to consider whether inflation dynamics may have changed in a persistent way, making our forecasts even more uncertain. my perspective on monetary policy how do these experiences and the principles of data dependence and risk management influence my views on current monetary policy? in 2019, well before joining the board, i took part in the federal reserve's fed listens event in chicago. a key takeaway from fed listens was the value of a sustained strong labor market that brings people off the sidelines - those who have been on the margins but who have skills that can be developed and the desire to be part of the workforce, if given a chance. just two weeks ago, we held another fed listens event to hear how businesses, families, and communities are adapting to changes in the post - pandemic economy. notably, we heard about the burden that lower - and middle - income families are feeling from high inflation. these events highlighted for me the importance of achieving both our employment and price - stability mandates. in our current economy, with a very strong labor market and inflation far above our goal, i believe a risk - management approach requires a strong focus on taming inflation. inflation poses both a near - and long - term threat. aside from the immediate effect of higher prices on households and businesses, the longer it persists and the more people come to expect it, the greater the risks of elevated inflation becoming entrenched. i think it is critical that we prevent an inflationary psychology from taking hold. this is not simply an abstract concept, but a risk i take seriously based on personal experience. my time doing dissertation research in russia in the mid - 1990s taught me just how disruptive and painful an extremely high - inflation environment can be. reports over the past few months have shown high inflation to be stubbornly persistent, while the labor market has remained strong. being data dependent, i