(Reuters) – Federal Reserve Governor Adriana Kugler said on Thursday U.S. inflation still has “some way to go” to reach the Fed’s 2% target, and that its path toward that goal continues to be bumpy.
Kugler said she supported the Fed’s decision last month to hold short-term borrowing costs in their current 4.25%-4.50% range, a level she feels exerts moderate restraint on the economy.
“I see this as appropriate, given that the downward risks to employment have diminished but upside risks to inflation remain,” Kugler said in remarks prepared for delivery at Georgetown University.
“The potential net effect of new economic policies also remains highly uncertain and will depend on the breadth, duration, reactions to, and, importantly, specifics of the measures adopted.”
Since his January 20 inauguration, U.S. President Donald Trump has announced a slew of proposals, including steep tariffs, deregulation, and attempts to slash government spending and return some of the savings to Americans. Some economists worry the plans could unleash inflationary pressures, while others have suggested they would make only a small impact.
Kugler did not take a side in that debate, as she noted the economy is on a firm footing, the labor market is healthy, and inflation has dropped a lot from its peak but is still elevated.
“Going forward, in considering the appropriate federal funds rate, we will watch these developments closely and continue to carefully assess the incoming data and evolving outlook,” Kugler said, echoing language from the Fed’s own recent policy statements.
The Fed is widely expected to keep interest rates steady when it meets again next month. Financial markets see a rate cut unlikely before June, with about a 50-50 chance of a second rate cut by year’s end.
(Reporting by Ann Saphir; Editing by Richard Chang)
