12:39 PM EDT, 06/25/2024 (MT Newswires) -- The Federal Open Market Committee will tread carefully to observe incoming data and consider multiple outcomes for the economy when managing monetary policy, Federal Reserve Governor Lisa Cook said Tuesday at the Economic Club of New York.

"One way to address such uncertainty is to consider a range of scenarios and not just the baseline forecast," Cook said.

First, inflation could remain high, lifting inflation expectations and requiring rates to remain higher for longer. Conversely, Cook said, the economy and labor market could weaken faster than expected and monetary policy would need to be adjusted to protect the employment side of the dual mandate.

"Considering the balance of risks related to these scenarios, I believe that our current policy is well positioned to respond as needed to any changes in the economic outlook," Cook said. "With significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy. The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks."

However, Cook emphasized that reducing inflation back to the 2% target is "an ongoing process and not a fait accompli."

"With disinflation continuing, albeit at a slower pace this year, and the labor market having largely normalized, I see the risks to achieving our employment and inflation goals as having moved toward better balance," Cook said. "Given our data dependence, we will closely monitor incoming information to determine the future path of policy."