Fed’s Kugler cautious about recent inflation ‘bump’

Fed’s Kugler cautious about recent inflation ‘bump’
Additional interest rate adjustments this year depend on the trajectory of inflation.
JAN 03, 2025
By  Bloomberg

 

Federal Reserve Governor Adriana Kugler said the US economy is ending the year in a good place, but noted she’d like to confirm inflation is once again on a downward path. 

“We saw that in the first quarter of 2024 there was that bump and now we’re seeing a bump again,” Kugler, referring to inflation, said Friday in an interview on CNBC. “We want to make sure that that is indeed just a bump and not something more permanent.”

While price pressures have eased substantially since 2022, progress toward the Fed’s 2 percent target has been choppy in recent months. The Fed’s preferred inflation gauge was up 2.4 percent in November from a year ago, in line with where the measure stood in June. 

Fed officials capped 2024 with a quarter-point interest-rate cut and new economic projections signaling just two rate reductions in 2025. Chair Jerome Powell has indicated further adjustments will depend on the trajectory of inflation

Kugler said November figures looked “a little better” than seen in September and October. A measure of underlying inflation increased just 0.1 percent in the month, the smallest advance since May.

“Part of the reason, when we saw that bump, is because non-market prices accounted for much of that increase, and those are imputed prices,” she said, echoing comments from Powell in December

Kugler said the labor market is resilient, emphasizing that cooling has been gradual. The unemployment rate — which ticked up to 4.2 percent in November — remains historically low, she added. 

When asked about policies proposed by President-elect Donald Trump, like fresh tariffs, Kugler emphasized the uncertainty surrounding the actual implementation of those policies. She said Fed officials are considering a wide range of possible scenarios. 

Kugler was scheduled to speak again on Saturday, during a panel with San Francisco Fed President Mary Daly. 

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