President Donald Trump's unfolding trade policy may curb U.S. productivity and possibly require higher interest rates to contain inflation in a less efficient economy, Federal Reserve governor Lisa Cook said on Friday.

Policymakers face a scenario that could force a choice between keeping prices in check and maximizing employment.

The Fed operates with a dual mandate of keeping the labor market healthy while maintaining stable prices. At the moment, the labor market remains solid and inflation, while not at the 2% annual level the Fed desires, has come down significantly. That could change if some of the more aggressive Trump tariffs take effect.