Inflation outlook has worsened since start of year – Fed governor

WASHINGTON - The US inflationary picture has worsened since the start of the year, which could prolong the Federal Reserve's ongoing fight against rising prices, a top Fed official warned Friday.

The central bank "may have more work to do," in its inflation fight if the data "show continued strength in the economy and slower disinflation," Lisa Cook, a voting member of the Fed's rate-setting committee, said in prepared remarks to an economic conference in Ohio.

The Fed has hiked its benchmark lending rate nine times in quick succession since March 2022 as part of an aggressive attempt to bring historically-high inflation down towards its long term target of two percent.

But recent turmoil in the banking sector sparked by the dramatic collapse of Silicon Valley Bank amid concerns over its interest-rate exposure caused the Fed to rethink a bigger hike in March.

It instead opted for a smaller quarter percentage-point increase.

Fed Chair Jerome Powell suggested after the decision that the Fed may raise interest rates just once more before bringing its current hiking cycle to an end.

Data released earlier Friday showed the Fed's favored measure of inflation slowed last month, providing some relief as it attempts to balance tackling higher prices with banking concerns.

But in her speech Friday, Cook warned that core inflation, which excludes volatile food and energy prices, remains elevated well above the level the Fed would like to see.

"The inflation picture is even less favorable than it appeared earlier this year," she said.

"Altogether, the incoming data would suggest a somewhat higher inflation rate for this year and stronger economic growth."

But Cook added that she would be "closely watching developments in the banking sector, which have the potential to tighten credit conditions and counteract some of that momentum," in the economy.

"The process of returning inflation to two percent has a long way to go and is likely to be uneven and bumpy," she said. -- Agence France-Presse