Last updated: February 7, 2024 at 11:20 AM ET
First Published: February 7, 2024 at 11am ET
Federal Reserve President Adriana Kugler said it would be “appropriate” to lower U.S. interest rates if inflation continues to slow, but said she wants inflation to return to the central bank’s 2% target. emphasized that it is “important.”
In his first speech as a Fed official Wednesday, Mr. Kugler did not say when it would be appropriate to cut interest rates. He said it would depend on how quickly inflation slows.
Finance…
Federal Reserve President Adriana Kugler said it would be “appropriate” to lower U.S. interest rates if inflation continues to slow, but said she wants inflation to return to the central bank’s 2% target. emphasized that it is “important.”
In his first speech as a Fed official Wednesday, Mr. Kugler did not say when it would be appropriate to cut interest rates. He said it would depend on how quickly inflation slows.
Financial markets had been expecting a rate cut as early as March, but after a parade of Fed officials said they were not yet ready to pull the trigger on a rate cut, the possibility of a rate cut was canceled in May. I postponed it.
Kugler noted that inflation is slowing faster than the Fed and most Wall Street DJIA economists expected.
Inflation has slowed to an annual rate of 2.9% in December from a 40-year peak of 7.1% in mid-2022, according to the PCE index, the Fed’s preferred price gauge.
“We have made great progress,” Kugler said in a talk at the Brookings Institution. “The slowdown in inflation we’ve seen over the past year or so is the most dramatic since the early 1980s.”
Still, Kugler said he expects the U.S. labor market and rent and housing costs to cool further to ensure inflation returns to pre-pandemic levels.
He said as labor demand and supply return to a better balance, wage pressures will recede and inflation will help return to pre-pandemic low levels.
“Therefore, I am pleased with the disinflationary progress to date and expect it to continue to be so.”
Coogler went on to say: “However, it must be emphasized that [Fed’s] The work isn’t done yet. ”
The Fed gradually raised interest rates from March 2022 to summer 2023 to quell the worst inflation since the early 1980s.
While rising interest rates depressed home sales and hurt manufacturers, the overall U.S. economy expanded at a surprisingly strong pace.
Fed officials say the economy’s resilience gives them more room to wait for a rate cut.