Fed’s Kugler Believes Current Monetary Policy Stance Well-Positioned To Take Care Of Changes In Macroeconomic Environment

Federal Reserve Governor Adriana D. Kugler said on Thursday that the central bank’s current monetary policy stance is well-positioned to address any changes in the macroeconomic environment.

Kugler was speaking at the Economic Club of New York.

“Disinflation has slowed, and we are already seeing the effects of higher tariffs, which I expect will continue to raise inflation over 2025,” she said.

“I see greater upside risks to inflation at this juncture and potential downside risks to employment and output growth down the road, and this leads me to continue to support maintaining the FOMC's policy rate at its current setting if upside risks to inflation remain,” Kugler stated.

The Fed official’s remarks on inflation come weeks before the June monetary policy announcement. According to the CME FedWatch tool, futures traders have factored in no rate cuts this month.

According to data released last week, the Personal Consumption Expenditures (PCE) Index for April, which is the Federal Reserve’s preferred gauge of inflation, rose lower than expected as President Donald Trump’s tariff impacts have yet to reflect in price rises.

The PCE index rose just 0.1% in April, which took the annual inflation rate to 2.1%. Core inflation rose 0.1% during the month, with the annual rate at 2.5%, marking the smallest rise in over four years.

Kugler also pointed out the prospect that trade and other policy changes could raise the unemployment rate and push employment away from the central bank’s objective.

“These policies, especially higher import tariffs, could also raise inflation over the rest of this year,” she said.

Meanwhile, U.S. benchmark indices traded marginally in the green by Thursday afternoon. The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 0.09% higher on Thursday afternoon, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, was up 0.03%.

Also See: Ken Griffin Expresses Disbelief At Widening US CDS Spreads: ‘You Gotta Be Kidding Me’

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