Fed's Cook Signals No Rate Cuts Amid Stubborn Inflation

George Anderson

Remarks of Officials

Data Interpretation

Economic

Central Bank

Political

Summary:

Fed Governor Lisa Cook prioritizes tackling stalled inflation, signaling no rate cuts despite political pressure.

Federal Reserve Governor Lisa Cook has made it clear that her primary focus is on tackling stalled inflation, signaling that she will not support another interest-rate cut until price pressures ease.

In a speech to the Economic Club of Miami, Cook identified stubborn inflation as a greater risk than any weakness in the labor market. "At this time, I see risks as tilted toward higher inflation," she stated, reinforcing the central bank's recent decision to hold its policy rate steady.

Inflation Plateau Creates Policy Hurdle

The Federal Reserve’s progress on bringing inflation back to its 2% target has hit a wall. According to Cook, core inflation, which excludes volatile food and energy prices, was running at about 3% at the end of last year.

"Such a plateau is frustrating after seeing significant disinflation in the preceding few years," Cook said.

This persistent, above-target inflation is the main obstacle to any further monetary easing. Cook emphasized that the Fed's credibility is on the line. "After nearly five years of above-target inflation, it is essential that we maintain our credibility by returning to a disinflationary path and achieving our target in the relatively near future," she explained.

Labor Market Strength Allows Inflation Focus

While inflation remains a concern, Cook views the labor market as stable. The unemployment rate stood at 4.4% in December, significantly below the 50-year pre-pandemic average of 6.2%.

She noted that the three interest rate cuts implemented last year, which brought the federal funds rate to its current range of 3.50%-3.75%, will continue to support employment. With the labor market on solid ground, the Fed has the leeway to concentrate on price stability.

"Until I see stronger evidence that inflation is moving sustainably back down to target, that is where my focus will be, in the absence of unexpected changes in the labor market," Cook concluded.

Uncertainty Looms Over Future Policy

Looking ahead, Cook acknowledged significant uncertainty, particularly regarding tariff policy and its impact on goods prices. While she expressed optimism that these effects will eventually fade and allow inflation to fall, the path forward is not guaranteed.

Another key risk is the possibility that public expectations of higher inflation could become entrenched, making it harder for the Fed to achieve its goal.

Cook’s hawkish stance aligns with her consistent voting record. Since joining the Fed in 2002, she has always voted with the majority and Fed Chair Jerome Powell on interest-rate decisions. Her latest comments come amid political pressure from President Donald Trump, who has advocated for more aggressive rate cuts and nominated Kevin Warsh, a proponent of lower rates, to potentially succeed Powell. The President also attempted to remove Cook from her position, an effort she is currently challenging at the Supreme Court.

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Thomas

Economic

Remarks of Officials

Political

Daily News

After multiple rounds of stalled negotiations, the United States and India have finalized a major trade deal, breathing new life into a floundering relationship. The agreement is a significant win for India's economy, as it slashes tariffs on products exported to one of its largest markets from 50% down to 18%.

The breakthrough comes alongside critical developments across South Asia, including escalating violence in Pakistan's Balochistan province and a new Indian budget that doubles down on manufacturing and defense.

The US-India Trade Breakthrough

The central question surrounding the new trade agreement is simple: why now? For years, India resisted granting greater access to politically sensitive sectors, particularly agriculture, which consistently derailed previous talks.

A History of Political Friction

Recent history has been marked by diplomatic tension. U.S. Commerce Secretary Howard Lutnick claimed that a deal was held up last summer because Indian Prime Minister Narendra Modi was unwilling to call President Donald Trump—a charge India has disputed. Some analysts also point to Trump's frustration over not receiving credit for his role in an India-Pakistan cease-fire as another obstacle.

However, the key concessions Trump cited as deal-makers were made long ago. India had already reduced its Russian crude imports following new U.S. sanctions last November, and its overall imports from the United States have been rising for years. This suggests another factor was at play.

The 'Gor Factor': A New Envoy's Impact

Much of the recent momentum can be traced to one individual: Sergio Gor, the new U.S. ambassador to India and White House special envoy. Since arriving in New Delhi, Gor has projected a strikingly positive tone about the partnership, marking a clear shift from the previous administration's approach.

Gor has engaged in a flurry of high-level meetings with key Indian officials, including:

• External Affairs Minister S. Jaishankar

• Commerce Minister Piyush Goyal

• Reserve Bank of India Governor Sanjay Malhotra

• Top military leaders

• Maharashtra Chief Minister Devendra Fadnavis

He was also instrumental in securing an invitation for India to join Pax Silica, a U.S.-led silicon supply chain initiative, after it was initially left out. Though not a career diplomat, Gor is a vocal supporter of the U.S.-India relationship, describing it at his Senate confirmation hearing as one of America's most important strategic partnerships. His influence in the White House and direct line to the president likely cleared the final hurdles.

Domestic and Geopolitical Pressures

Other factors may have also pushed the deal across the finish line. With tariffs contributing to rising food inflation in the United States, Trump likely had domestic political incentives. Additionally, the White House may have been concerned about India's new free trade agreement with the European Union.

Ultimately, the deal provides a platform for future progress and could pave the way for a delayed Quadrilateral Security Dialogue summit in New Delhi. With a tangible achievement to celebrate, Trump on Monday called Modi one of his "greatest friends."

Regional Security and Economic Shifts

Beyond the trade deal, other major events are reshaping the region's landscape.

Violence Escalates in Pakistan's Balochistan Province

The Balochistan Liberation Army (BLA) launched a series of coordinated attacks last Saturday across the province, including in the capital, Quetta. The violence resulted in the deaths of nearly 50 people, including 31 civilians. Pakistan's military reported that its response killed at least 145 BLA fighters, marking one of the deadliest episodes in the region in years.

While the Tehrik-i-Taliban Pakistan (TTP) often dominates headlines, the BLA has quietly strengthened its capabilities. The separatist group has successfully used local grievances over resource exploitation and state crackdowns to fuel its recruitment drives. Its effectiveness was demonstrated last March when it hijacked a passenger train. Pakistani authorities have so far struggled to contain the BLA, relying on military operations that fail to address the underlying drivers of the insurgency.

India's 2026-27 Budget Focuses on Tech and Defense

Indian Finance Minister Nirmala Sitharaman unveiled the government's 2026-27 budget, which pivots away from the populist measures of the previous year, such as middle-class tax cuts. Instead, the new budget prioritizes spending on infrastructure and manufacturing.

Key sectors set to receive a boost include semiconductors and rare-earth magnets, positioning India to compete in the modern global economy. The budget also allocates a record $85 billion to defense, a 15% increase from last year. This sharp rise is likely a response to last May's conflict with Pakistan and a strategic hedge against uncertainties in its partnership with the United States.

A Glimmer of Hope for Pakistan's Economy?

A recent Gallup survey suggests public sentiment in Pakistan is slowly improving, though it remains broadly negative. The poll, published Monday, found:

• 31% of Pakistanis felt their living standards were improving in 2025, up from a low of 15% in 2023.

• 25% believed the overall economy was getting better, compared to 12% in 2024.

• Approval of the country's political leadership rose to 36%, up from 22% the previous year.

These figures align with a recent stabilization of Pakistan's macroeconomy. However, the country continues to face high poverty rates and widespread public anger over increasing political repression.

Geopolitical Maneuvering in the Indian Ocean

In an interview with Newsweek, Maldivian President Mohamed Muizzu made a direct pitch to President Trump concerning the strategically vital Chagos Islands. Muizzu proposed that if sovereignty of the archipelago were transferred to the Maldives, he would guarantee the United States could continue using its military base on Diego Garcia.

Last year, the United Kingdom agreed to eventually transfer the islands to Mauritius, a deal Washington opposed over fears it would jeopardize access to the base. On Tuesday, the UK announced it had secured an agreement with the U.S. to ensure continued access for both nations.

Muizzu's offer highlights his ambition to elevate the geopolitical profile of the Maldives, an island nation best known for tourism. The move may also be a subtle appeal to the Trump family's business interests; last November, the Trump Organization announced a partnership to develop a luxury hotel in the Maldives, slated to open by 2028.

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Stocks

Apple (AAPL) Inc. is trading in the opposite direction of technology stocks and the broader market as investors increasingly view it as an oasis of safety amid fears of artificial intelligence disruption.

The iPhone maker’s shares were up 1.8% at around 12:30 p.m. in New York on Wednesday, compared with a 2.4% decline in the tech-heavy Nasdaq 100 Index. That means Apple is outperforming by its widest degree since early 2025. The move extends a recent trend, with Apple up nearly 6% to start this month, while the index is down 3.3%.

The gain has resulted in a market capitalization of just over $4 trillion for Apple, allowing it to squeak past Alphabet Inc. for the title for the second-largest company in the world, after Nvidia Corp.

“It doesn’t seem like the AI disruption theme is extending to hardware, which is certainly a positive at a time when the market has made the decision that AI is going to eat the entire software space,” said Dan Eye, chief investment officer at Fort Pitt Capital Group, which holds Apple shares in multiple portfolios.

The divergence reflects both positive trends at Apple and growing uncertainty in much of the tech sector. Results from Apple last week featured record quarterly sales and a better-than-anticipated forecast. At the same time, new AI tools from Alphabet Inc. and the startup Anthropic have spurred widespread selling of tech stocks, as investors fret that AI services will eat into growth.

“Apple isn’t a value name, but it isn’t high-risk either,” Eye said.

The company is expected to be a beneficiary of AI adoption, as hardware like the iPhone is expected to be a central place where users access AI services. Last month, Alphabet’s Google entered a multiyear deal to power Apple’s AI technology, including the Siri voice assistant.

Meanwhile, Software stocks have come under broad pressure, with a popular exchange-traded fund tracking the group down 2.7% and on track for a seventh straight negative session, its longest losing streak in more than two years. Even Microsoft Corp. has lost 14% this year, as the company’s earnings featured a disappointing read on its cloud-computing business along with increased scrutiny on the amounts it is spending on AI.

“Apple’s decision to stay out of the AI arms race seems like a smarter play today than it did six months ago,” Eye said. “It should still benefit from AI, but it isn’t forced to run up a hundred billion in debt and capex to fund a lot of infrastructure and projects.”

Source: Bloomberg

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Stocks

Google’s latest quarterly report provided further evidence that its internet empire is withstanding an artificial intelligence shakeup that’s turning into another potential boon for the company.

The numbers released Wednesday marked Google's third consecutive quarter of digital ad growth of more than 10% from the previous year, while also posting more than 30% sales growth in its division that powers data centers for AI services.

Those increases during the October-December period propelled Google’s corporate parent Alphabet Inc. well past the earnings forecasts of stock market analysts.

Alphabet’s fourth-quarter profit rose 30% from the prior year to $34.5 billion, or $2.82 per share, while revenue climbed 18% to $113.8 billion.

The collective momentum of Google’s main business in search and advertising and the still-nascent AI field indicates a company born during the late 1990s internet boom is becoming even stronger during another technology phenomenon nearly 30 years later.

“Search saw more usage than ever before, with AI continuing to drive an expansionary moment," Alphabet CEO Sundar Pichai said.

Google’s successful evolution has helped drive up Alphabet’s stock price nearly 60% in the past five months, giving it a $4 trillion market value. That may have raised the bar for Alphabet to impress investors as the company's shares dipped 1% in extended trading following the report.

Apple, also currently worth $4 trillion, thinks so highly of Google’s AI that the iPhone maker recently struck a deal to use Google’s Gemini technology in a long-delayed upgrade to its virtual assistant, Siri.

Google is also embedding more of its Gemini AI into its long-dominant search engine, Gmail and Chrome browser as it tries to avoid complacency and being outmaneuvered by up-and-coming companies such as OpenAI, Anthropic and Perplexity.

To meet the challenge, Alphabet has been on a spending spree to expand its AI capacity. After pouring $91 billion into capital expenditures devoted mostly to AI last year, the Mountain View, California company is expected to spend even more this year. Its capital expenditure budget has ballooned from about $30 billion annually since 2022 when OpenAI released its ChatGPT chatbot to much acclaim, prompting Google to pull out all the stops to catch up.

Google's thriving digital ad business is helping finance the spree. Its digital ad sales totaled $82.3 billion in the fourth quarter, up 14% from the previous year. Google Cloud, which oversees the data centers behind many AI services, posted revenue of $17.7 billion, a 48% increase.

Source: AP

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Frederick Miles

Remarks of Officials

Economic

Central Bank

Daily News

Political

U.S. Treasury Secretary Scott Bessent on Wednesday disavowed his previous warnings about tariffs, telling Congress he was mistaken to claim they would fuel inflation. The statement marks a significant reversal from advice he gave investors at his firm, Key Square, in January 2024, before Donald Trump’s successful presidential campaign.

During a tense House Financial Services Committee hearing, Bessent directly addressed his past analysis. "If I was mistaken, I want to correct it," he stated. "And I was also mistaken when I said the tariffs could be inflationary."

The "Dog That Didn't Bark"

Bessent, a Trump appointee, argued that the U.S. economy’s performance since the president returned to office in January 2025 has invalidated concerns over tariff-driven price hikes. He pointed to economic growth and cooling inflation as evidence.

"So tariff inflation was the dog that didn't bark," Bessent told lawmakers.

This view contrasts with recent economic data and commentary from the Federal Reserve. Last month’s Producer Price Index showed a larger-than-expected rise in December, and Fed Chair Jerome Powell recently noted that companies passing tariff costs on to consumers were keeping inflation at elevated levels.

Tense Exchange Defines Congressional Hearing

Democrats on the committee used the hearing, which was focused on the Financial Stability Oversight Council’s annual report, to challenge Bessent on the administration's trade policy.

Representative Maxine Waters, the committee's senior Democrat, led the questioning, referencing the same Key Square investor letter that predicted tariff inflation would strengthen the dollar. She demanded a "yes" or "no" answer on whether tariffs cause inflation.

Bessent cited data from the San Francisco Federal Reserve to argue they do not. Waters countered, claiming that prices for coffee and bananas rose after tariffs were imposed on producer countries. She added that tariffs on steel, lumber, and appliances were increasing costs for homebuilders and contributing to housing inflation.

The exchange escalated when Bessent attributed rising housing costs to a surge of immigrants. Waters repeatedly cut him off, stating, "Reclaiming my time," before asking Committee Chairman French Hill, "Can you shut him up?"

Bessent's full admission that his earlier inflation warning was wrong came later in the hearing, during questioning by Democrat Sean Casten.

Questions Mount Over Federal Reserve Independence

The hearing also explored the administration’s views on the independence of the Federal Reserve. Democrats pressed Bessent on whether he believed President Trump has the constitutional authority to fire the Fed chair or board members over policy disagreements.

Bessent stated he considers the central bank an independent agency but said he had no opinion on the president’s firing authority.

He acknowledged that "varying opinions" exist within the administration regarding the "unitary executive" theory, a legal doctrine that grants the president vast executive power. Bessent, who is not a lawyer, said the matter would ultimately be decided by the U.S. Supreme Court.

The Court heard arguments last month related to Trump's attempt last year to fire Fed Governor Lisa Cook, with a ruling anticipated by the end of June.

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Political

Commodity

President Donald Trump sent a fresh warning to Iran’s leaders as US military forces amass in the region, even as diplomatic talks between Washington and Tehran appeared to remain on track.

“I would say he should be very worried, yeah. He should be,” Trump said in an interview with NBC News on Wednesday, when asked about Iran’s supreme leader. “As you know, they are negotiating with us.”

Iranian Foreign Minister Abbas Araghchi said in a social media post Wednesday that talks with the US were scheduled to be held in Muscat, Oman on Friday morning. Secretary of State Marco Rubio had said earlier on Wednesday that the US thought an agreement had been reached for the meeting to be held on Friday in Turkey.

Rubio had said Washington is open to upcoming talks with Iran and that a location is “being worked through,” but stressed the discussions can’t be restricted to nuclear issues.

“As far as the talks are concerned, you know, I think the Iranians had agreed to a certain format — for whatever reason, it’s changed in their system,” Rubio told reporters. “But the United States is prepared to meet with them.”

Iran has asked for the discussions — which follow repeated threats by Trump to strike the country if it doesn’t agree to a deal — to be moved to Oman from Turkey and to exclude the participation of regional countries, people familiar with the matter said earlier. The White House hasn’t commented on any request of that nature.

Iran also wants to limit the discussions to its nuclear program, but Rubio said that “for talks to actually lead to something meaningful, they have to include certain things.” That includes Tehran’s ballistic-missile program, sponsorship of regional militant groups and the treatment of its people, Rubio said, adding White House Middle East Envoy Steve Witkoff is prepared and ready to attend a summit.

Contrasting positions over the parameters of the talks are likely to raise concerns about whether the two sides can realistically bridge major differences at a time of heightened tensions in the oil-rich region. The US and Iran have long been at loggerheads over the Islamic Republic’s atomic activities, but divisions have grown — particularly after Tehran authorities crushed a recent wave of protests, leaving thousands dead.

On Tuesday, a US jet shot down an Iranian drone after it “aggressively approached” the Abraham Lincoln aircraft carrier in the Arabian Sea, the American military and government said. The skirmish sent oil prices higher.

Iran has previously pushed back against negotiating with the US over its conventional missile capabilities, but the country is more vulnerable than in earlier rounds due to unprecedented levels of dissent at home.

Talks between Tehran and Washington last year collapsed after Israel started airstrikes on Iran in June.

Araghchi said last week that Iran’s missiles will “never” be subject to negotiations, and Iran’s President Masoud Pezeshkian has explicitly tasked him with negotiating “within the framework of the nuclear deal.” That refers specifically to Iran’s atomic activities, with the Islamic Republic having blocked international monitors from accessing some nuclear facilities after Israel and the US launched airstrikes in June.

The talks would mark the first public meeting between Iranian and US officials since Tehran violently suppressed mass protests in Iran last month.

Source: Bloomberg

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Cryptocurrency

Bitcoin (BTC-USD) fell 2% on Wednesday to around $73,000 per token after Treasury Secretary Scott Bessent suggested the US government would not bail out the cryptocurrency.

In a heated back-and-forth during a House Financial Services Committee hearing, Bessent was asked if the US Treasury had the authority to buy bitcoin or other cryptos.

"I do not have the authority to do that, and as chair of FSOC, I do not have that authority," Bessent stated.

The decline on Wednesday was also fueled by the broader selling pressure in markets and a warning from notable investor Michael Burry that a sustained decline in bitcoin's price could "set in motion a death spiral leading to massive value destruction."

"Bitcoin has been exposed as a purely speculative asset, and is not near the debasement trade hedge that gold and other precious metals are," Burry, who rose to prominence after predicting the 2008 financial crisis, wrote in his Substack.

The move lower only added to bitcoin's recent rout. The world's largest cryptocurrency is down 13% over the past five days.

The world's largest cryptocurrency dropped sharply last weekend, touching its lowest levels since last April and notching a fourth straight month of losses.

The move lower coincided with President Trump's announcement on Friday selecting Kevin Warsh to lead the Federal Reserve when Jerome Powell's term ends in May, a nomination markets view as hawkish.

Ether (ETH-USD) and other digital tokens also slid.

With bitcoin's next support level at $73,000, "current flows suggest sentiment has shifted meaningfully," 10X Research strategists wrote in a recent note.

The firm's strategists pointed to flow and positioning data, which indicated "investors are not yet positioned to buy the dip."

"While sentiment and technical indicators are approaching extreme levels, the broader downtrend remains intact," the researchers wrote. "In the absence of a clear catalyst, there is little urgency to step in."

The firm noted that traders remain focused on deleveraging and unwinding their positions rather than on preparing for a typical snapback rally.

Pressure on digital assets reflected the broader fragility across the crypto market. Aside from a brief bounce last month, bitcoin has struggled since October, when whale selling and forced liquidations swept through the industry.

Fundstrat head of digital assets Sean Farrell said the mid-$70,000 region stands out as a logical support zone, given that around $74,000 was the intraday high in March 2024 and the intraday low in April 2025 during the tariff-driven sell-off.

"All else equal, the levels reached over the weekend and the degree of capitulation observed create a more attractive near-term risk/reward," Farrell wrote in a Monday note.

The strategist said the pullback could warrant a "modest" deployment of dry powder but warned that conditions are still trending lower, with an "ample amount of positioning risk in traditional markets that could adversely affect crypto markets."