Fed Governor Kugler Warns of Inflation Risks Amid Economic Policy Uncertainty

Concerns Over Inflation Persist as Fed Maintains Interest Rates / Routers

Federal Reserve Governor Adriana Kugler emphasized that U.S. inflation still has a long way to go before reaching the central bank's 2% target, cautioning that the journey remains uncertain. Speaking at Georgetown University, Kugler supported the Federal Reserve's decision to maintain short-term interest rates within the 4.25%-4.50% range, highlighting that this level continues to exert moderate pressure on economic activity.

She noted that while the risk to employment has decreased, the potential for inflation to rise remains significant. Additionally, she underscored the unpredictability of new economic policies, stating that their ultimate impact will depend on various factors, including their scope, duration, and public and market reactions.

Since President Donald Trump's inauguration on January 20, his administration has proposed several economic measures, including increased tariffs, deregulation, and significant reductions in government spending. While some economists warn that these policies could fuel inflation, others argue that their impact may be limited. Kugler refrained from taking a stance on the matter but acknowledged that the U.S. economy remains strong, the labor market is stable, and inflation has declined considerably from its peak while still remaining above target.

She reiterated the Federal Reserve's commitment to closely monitoring economic indicators and policy developments when determining the appropriate federal funds rate. The central bank is expected to maintain interest rates at current levels during its next meeting, with financial markets anticipating that the first rate cut may not occur until at least June. Traders currently assess a 50-50 probability of a second rate reduction by the end of the year.