Federal Reserve Governor Lisa D. Cook said the country is still in a "pandemic-related economy," which is contributing to lasting inflation.
"The main driver of inflation is aggregate demand being out of whack with aggregate supply," Ms. Cook said Monday at an event hosted by the University of Michigan Department of Economics. "So that's what happened during the pandemic; there was a shift to goods away from services. We've been waiting for the shift to happen back — it hasn't completely happened."
Ms. Cook said that while supply chains are still healing from the pandemic, there is also a tight labor market right now. "There's still roughly two jobs for every person who's unemployed," she added.
At a Federal Open Market Committee meeting in March, Fed Chairman Jerome H. Powell also characterized the labor market as "tight." The committee's 11 members unanimously approved a 25-point rate hike at the meeting, raising the federal funds rate to a range of 4.75% to 5%.
On Monday, Ms. Cook noted that while there are several factors contributing to economic uncertainty right now, the Fed's methods for tightening monetary policy have not changed.
"There's still a pandemic; there is still aggression in Ukraine, by Russia; there is still the opening of China," Ms. Cook said. "So there's still a lot of uncertainty, but it still remains that our methods, our ways of tightening policy, are still the same. So I don't think that those have changed in any fundamental way."
When asked about the recent collapses of Silicon Valley Bank and Signature Bank, Ms. Cook said she has a heightened interest in "looking at how credit might be tightening in that particular sector."
"What I would particularly worry about is that small businesses, new businesses, in particular, approach banks like SVB, and they need banks that really understand their business model," she said. "And if credit is withdrawn in this sector, it could have implications for innovation, because new firms are the source of a lot of innovation in this country."