MNI: Fed's Kugler - Steady Rate Until Inflation Risks Ebb

The Federal Reserve should keep interest rates on hold at current levels until the looming threat of higher inflation, including from tariff policies, abates, Fed Governor Adriana Kugler said Tuesday. 

"I will support maintaining the current policy rate for as long as these upside risks to inflation continue, while economic activity and employment remain stable. I remain committed to achieving both of our dual-mandate goals of maximum employment and stable prices," Kugler said in prepared remarks. 

She said progress on inflation has slowed since last summer, and the introduction of widespread tariffs on U.S. imports "will likely put upward pressure on prices." 

"Both survey- and market-based measures of near-term inflation expectations have moved up. Longer-term inflation expectations — those beyond the next few years — largely remain well anchored and consistent with our 2% inflation goal, and I hope
they continue in that way," said Kugler.

At the same time, new trade frictions will also be drag on economic activity, she said. (See: MNI POLICY: Fed Forced Into Hawkish Stance Despite Growth Risk)

"GDP growth for the first quarter, which will be reported next week, may show some moderation relative to what we saw in 2024, although this moderation may be offset by increased purchases front-loading the implementation of tariffs," said Kugler. 

"Financial markets have experienced increased volatility in recent weeks. If financial conditions were to tighten persistently, that could weigh on growth in the future."