Sitting beside David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, Federal Reserve Governor Lisa Cook paused before replying to the last — and most personal — question she would face Monday afternoon.

“Despite all the stuff that’s gone on,” asked Wessel, imagining the young people who may have ambitions of holding public office one day, “is it worth all the scrutiny and everything?”

“I would say it is definitely worth the scrutiny,” she replied.

Cook’s appearance at the Hutchins Center occurred in advance of the Federal Reserve Board’s Friday release of its semiannual Financial Stability Report, and subsequent to the Fed’s lowering of its benchmark borrowing rate by 0.25% last week.

That decision produced two formal dissents. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, voted to leave rates unchanged. Stephen Miran, the newest member of the Federal Open Market Committee, was in favor of a jumbo cut of 50 basis points.

“I viewed that decision as appropriate,” Cook said, “because I believe that the downside risks to employment are greater than the upside risks to inflation. I view the latest reduction in the fed funds rate as another gradual step toward normalization.”

Her prepared remarks and ensuing tête-à-tête with Wessel represented Cook’s first formal appearance since President Donald Trump moved to fire her in late August, citing allegations of mortgage fraud promulgated by Federal Housing Finance Agency Director Bill Pulte.

A two-sentence, unsigned order issued by the Supreme Court in early October permits Cook to continue serving on the Fed’s board and its 12-member rate-setting committee until the high-profile case is resolved. Oral arguments are scheduled to begin in January.

Cook referenced the proceedings only briefly to express gratitude for those who have shown support, calling it “inappropriate” for her to comment publicly and “the honor of my life to serve on the Board of Governors of the Federal Reserve System.”

“You have to be attentive to everything.”

Compiled by the Fed’s Committee on Financial Stability that Cook chairs, the Financial Stability Report due out Friday presents the U.S. central bank’s current assessment of risks facing the financial system.

“You have to be attentive to everything,” Cook said of her role chairing the committee and broader function as a Fed governor.  

Those risks are myriad and shifting, from layered leverage in rapidly expanding private credit markets to softening labor markets, tariff policy and the integration of artificial intelligence into everything, “even if you don’t want it,” she joked. “We’re concerned about anything that grows as fast as private credit has,” she added.

Regarding generative AI, Cook said she thinks it “has potential to help increase the arrival rate of ideas,” with the potential to be a “game-changer” as it relates to productivity growth. But the gains have yet to materialize, she said, leaving the overall outlook on AI’s impact uncertain.

Wessel tried to weasel more of the report’s insights from Cook ahead of its public release.

“Market participants believe that the most important concerns have changed completely in the last six months,” she intimated, without elaborating. “Page 54,” she added.

‘A teachable moment’

The Fed has a dual mandate to maximize employment and maintain stable prices. That mandate has been in tension over the course of 2025.

Months of weak job creation have raised concerns that more severe labor market deterioration may be around the corner. At the same time, inflation is running well above the Fed’s stated target of 2% annualized growth.

“My assessment is that inflation is on track to continue on its trend toward our target of 2% once the tariff effects are behind us,” Cook said, repeating a common refrain from Fed Chair Jerome Powell on the likely trajectory of tariff impacts on consumer prices.

That statement came with a caveat, however, as Cook warned she “will be prepared to act forcefully, if the tariff effects appear to be larger or last longer than expected, or if other evidence emerges that higher levels of inflation are becoming entrenched in expectations.”

Cook remarked that the labor market has not deteriorated as much as feared, though the jobs outlook could deteriorate “very quickly,” and the cone of uncertainty remains wide. Vulnerable groups have seen disproportionately worsening job conditions compared with the broader market, she said.

“There are risks to both sides of the dual mandate,” Cook explained, calling the predicament facing policymakers “a teachable moment” for professors to one day dissect.

Until then, “I still see monetary policy as being moderately restrictive,” Cook concluded.