Fed's Cook: US data consistent with a soft landing

By Howard Schneider

(Reuters) - U.S. inflation should continue to fall without a significant further rise in the unemployment rate, Federal Reserve Governor Lisa Cook said on Wednesday.

In remarks prepared for delivery to an economics conference in Australia, Cook said she felt the evidence for a U.S. "soft landing" was lining up, with the Fed's preferred measure of inflation most recently at 2.6%, versus the central bank's 2% target, and the unemployment rate at 4.1%.

"My baseline forecast...is that inflation will continue to move toward target over time, without much further rise in unemployment," Cook said. While soft landings have been rare in economic history, she said, the fast decline in inflation without a substantial rise yet in the unemployment rate bodes well, and puts a premium on the Fed's getting the right timing on its decision to begin easing monetary policy.

Soft landings are "more likely when policy easing began with inflation already close to target and when there was a relatively firm growth backdrop," she said. "In the U.S., what I have seen so far appears to be consistent with a soft landing: Inflation has fallen significantly from its peak, and the labor market has gradually cooled but remains strong."

The Fed next meets on July 30-31, with investors expecting rate cuts to begin as soon as the following meeting in September.

(Reporting by Howard Schneider; Editing by Leslie Adler)