Federal Reserve Governor Adriana Kugler on Interest Rates

(Reuters) – Federal Reserve Governor Adriana Kugler expressed strong support for the recent U.S. central bank interest rate cut during a speech on Tuesday. She indicated her willingness to back further reductions if inflation continues to ease as anticipated.

Kugler emphasized the importance of keeping the focus on reducing inflation to 2%, while also addressing the need for a balance between inflation control and maximizing employment, pointing to her role in the Federal Open Market Committee (FOMC).

She stated, "The labor market remains resilient, but I support a balanced approach to the FOMC's dual mandate so we can continue making progress on inflation while avoiding an undesirable slowdown in employment growth and economic expansion."

Her remarks were delivered during a conference organized by the European Central Bank in Frankfurt, Germany, where she discussed the global factors contributing to post-pandemic inflation and the varying impacts across different regions as inflation began to decline.

Kugler applauded the Fed's decision to lower rates last month, consistent with actions taken by other central banks, including the ECB. She noted that a robust U.S. economy allowed the FOMC to adopt a patient approach to policy adjustments while concentrating on lowering inflation.

In her speech, Kugler asserted, "If progress on inflation continues as I expect, I will support additional cuts in the federal funds rate to move toward a more neutral policy stance over time."

Additionally, she is monitoring the economic repercussions of Hurricane Helene and geopolitical tensions in the Middle East.

Kugler warned that, "If downside risks to employment escalate, it may be appropriate to move policy more quickly to a neutral stance." Conversely, she added that if the data does not indicate a sustainable move toward 2% inflation, it might be wise to slow down the normalization of the policy rate.