MNI: Fed Gov Kugler Sees Rates On Hold For Some Time

The Federal Reserve can keep interest rates on hold "for some time" in this uncertain environment because economic indicators are solid, Fed Governor Adriana Kugler said Tuesday, adding she's paying close attention to rising inflation expectations. 

"Given the economy’s overall solid position and the heightened level of uncertainty, I supported the Federal Open Market Committee’s decision last week to maintain the policy rate at its current level," she said in remarks prepared for a U.S. Hispanic Chamber of Commerce conference in Washington.

"I see current policy as continuing to be restrictive and I judge that FOMC policy is well positioned. The committee can react to new developments by holding at the current rate for some time as we closely monitor incoming data and the cumulative effects of new policies." (See: MNI INTERVIEW: Fed Backing Away From 2025 Cuts, Says Lacker)

SLOWER PROGRESS

Progress on bringing inflation back to target has slowed since last summer and consumers are expecting further price increases as President Donald Trump imposes tariffs on a range of products, Kugler said.

Goods inflation has turned positive in recent months, an "unhelpful" development because it "has often kept a lid on total inflation and also affects inflation expectations," she said. "I am paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past few years." (See: MNI INTERVIEW: Inflation Expectations Worrisome For Fed- UMich)

The labor market appears to be stable through February, said Kugler, a former chief economist at the U.S. Department of Labor. The slowdown in hiring in the first two months of the year could reflect weather disruptions and seasonal adjustment challenges, she said. 

Bad weather and seasonal adjustment issues similarly may have accentuated the slowdown in retail sales in January, some of which was reversed the next month, she added.