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"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," Cook said Tuesday in prepared remarks to the Economic Club of New York. 

"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," she said. 

U.S. central bankers left their benchmark rate unchanged at a more than two-decade high earlier this month, a level they've maintained for nearly a year. Policymakers say they need to see more data to be convinced that inflation is on a sustainable path toward their 2% target.

The Fed's preferred underlying price gauge is expected to rise just 0.1% in May from a month earlier — marking the slowest advance of the year — in data out Friday. 

Cook expects three- and six-month inflation rates to continue to move lower on a "bumpy path," with monthly data similar to the "favorable" readings seen in the second half of 2023 for the rest of the year. Annual inflation, however, will move roughly sideways, she said. 

"Beyond that, I see inflation slowing more sharply next year, with housing-services inflation declining to reflect the past slowing in rents on new leases, core goods inflation remaining slightly negative, and inflation in core services excluding housing easing over time," Cook said.

The Fed governor said monetary policy is restrictive, as high interest rates put downward pressure on aggregate demand. 

While the economy remains resilient and the labor market strong, high mortgage rates have slowed home sales and construction, and delinquencies are rising as elevated prices and borrowing costs strain some Americans. 

Cook said the rising delinquency rates "are not yet concerning for the overall economy but bear watching." 

The labor market is about where it was before the pandemic, she added, calling it "tight but not overheated." She said data suggests payroll job gains were overstated last year and may continue to be this year. 

Speaking during a question-and-answer session following the speech, Cook said she and other policymakers are "attentive" to the risk that the labor market could "change very quickly," and officials stand ready to respond. She demurred when asked about the potential for rate cuts this year, saying policymakers are data dependent.

Speaking earlier Tuesday, Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook, and reiterated the need to keep borrowing costs elevated for some time. 

"We are still not yet at the point where it is appropriate to lower the policy rate," Bowman said Tuesday in London. "Given the risks and uncertainties regarding my economic outlook, I will remain cautious in my approach to considering future changes in the stance of policy."