Lisa D Cook: Outlook for the US and Alaskan economies

Ladies and gentlemen, it is a pleasure to be here in Alaska, representing the Federal Reserve. As many of you know, my career has been dedicated to economics and data. At the Federal Reserve, I have access to the most current and valuable data at my disposal. However, there is no substitute for the insights researchers and policymakers can gain from real-world interactions.

This is why I am grateful to be here today, to share my perspective on the economy's trajectory and to learn from all of you about the impact of monetary policy on your lives, careers, and businesses.

My primary focus today is to provide an economic outlook for the United States and to delve deeper into Alaska's economy. My assessment is that the U.S. economy will continue to be resilient and grow at a steady pace. Inflation remains stubbornly high, exceeding the Federal Open Market Committee's 2% target for over five years. The labor market, however, appears stable, with low hiring and firing rates.

Regarding the price stability aspect of our mandate, my view is that inflation is too high. In June, the personal consumption expenditures price index rose 3.7% over the past year, nearly double our target. Inflation has been driven by energy costs due to the Middle East conflict and increased capital spending on artificial intelligence infrastructure.

While the latter has led to higher prices for semiconductors, high-tech equipment, software, and utilities, these factors have shifted the risk balance toward inflation and away from the labor market.

On the employment side, the labor market has remained resilient. The unemployment rate in June was 4.2%, unchanged from a year earlier, aligning with the natural rate of unemployment that economists believe. Job growth was modest but picked up during the spring months, with more than 100,000 jobs added per month on average. Low hiring rates may be restraining worker sentiment, but international and state-level evidence suggests that such rates, when reflecting slow population growth, do not signal an impending downturn.

Overall, U.S. economic growth remains solid this year, with output growing at a 1.8% pace through the first half of the year and expected to grow faster in the second half. This growth has been driven by AI-related investments. U.S. households are also resilient, with consumer spending advancing at close to a 2% rate in the first half. However, housing remains a soft spot, with residential investment edging down about 3%.

In terms of monetary policy, I am prepared to act if necessary to bring inflation down, as inflation is too high and the risks to the inflation side of our dual mandate are currently higher than those to the employment side. While some disinflationary forces, such as the passing of tariffs' effects, are already in play, I believe further rate increases may be necessary to achieve the target inflation rate.