Federal Reserve President Adriana Kugler on Tuesday said she “strongly supports” the decision to cut interest rates by 0.5 percentage point in September and would support further rate cuts if inflation continues to fall.
“If inflation continues as I expect, I would support further cuts in the federal funds rate to move toward a more neutral policy stance over time,” Kugler said in a speech in Germany.
But he stressed that any decision on a rate cut would depend on “multiple and diverse sources” of economic data.
He said that if downside risks to the job market intensified, “it may be appropriate to move policy more quickly to a neutral stance”, but that coming data showed that inflation would rise. He added that the Fed may need to slow the pace of rate cuts if it does not have confidence that it will. We are making sustained progress toward the Fed’s 2% goal.
Fed Director Adriana Kugler speaks during the 2023 Senate Banking Sector Nomination Hearing (Photo by Drew Angerer/Getty Images) (Drew Angerer via Getty Images)
Markets are currently pricing in a 25 basis point rate cut at the next policy meeting in November.
Kugler’s comments come ahead of a new view on inflation later this week. The Consumer Price Index (CPI), which will be released on Thursday, shows that the core inflation rate, which excludes volatile food and energy prices that are out of the Fed’s control, remained stable at an annualized rate of 3.2% in September, down from the same level in August. It is expected that this will happen.
Month-on-month CPI growth is expected to be 0.2%, up from 0.3% in August.
Kugler said he believes the focus should remain on bringing inflation down to 2%, but supports shifting attention to the job market as well. The Fed has a dual mission: to maintain price stability and ensure maximum employment.
“While the labor market remains resilient, I am seeking a balance between the FOMC’s dual responsibilities so that we can continue to move inflation forward while avoiding an undesirable slowdown in job growth and economic expansion,” he said. I support the approach taken.”
Kugler’s comments followed a much better-than-expected September jobs report that added more than 250,000 jobs and lowered the unemployment rate to 4.1%, but 4.0% without rounding. There is a possibility that it will become.
Kugler said he is also monitoring the economic impact of Hurricane Helen and geopolitical events in the Middle East for any impact on the U.S. economic outlook.
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