MNI BRIEF: Fed Kugler Eyeing Inflation Persistence Over Growth

Federal Reserve Governor Adriana Kugler said Friday she expects the impacts from new policies in Washington to raise prices before there is an impact on economic growth, underpinning her argument for a hold on interest rates for some time. 

Asked whether there has been a shift to focus more on the lack of economic growth rather than inflation, Kugler said, "No. I am actually quite concerned about some of the persistence in inflation that we've been seeing." She pointed to positive goods inflation and recently rising inflation expectations. "I am one of those people who really pays a lot of attention to inflation expectations."

Policy shifts emanating from Washington are likely to hit prices more quickly than having an impact on economic growth, she said in Q&A at an event at the Bank of Portugal. "Which one is going to happen first? Is it the effect on prices or is it the effect on quantities? And usually we know that we know the effect on prices is faster and happens more quickly then the effect on quantities." (See: MNI INTERVIEW: Fed To Cut Just Once Due To Tariffs - Carpenter)

"We need to take account of some of this [inflation] persistence," she said, pointing to underlying price trends, inflation expectations, and "potentially because of some of these new policies that are ahead of us."