Fed's Kugler: Inflation to slow further and result in rate cuts this year


Federal Reserve (Fed) Governor Adriana Kugler said on Wednesday that she believes inflation will continue to fall this year and pave the way for the central bank to cut interest rates, per Reuters

Key quotes

“My policy rate expectation is consistent with March FOMC meeting policymaker projections.”

“If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate.”

“Expect the disinflationary trend to continue.”

“Policy is currently restrictive, and my baseline expectation is that disinflation will continue without a broad economic slowdown.”

“Such an outcome is not assured.”

“Inflation progress has sometimes been bumpy.”

“Annual core PCE at 2.8% represents 'considerable progress' but is still 'meaningfully above' Fed's 2% target.”

“Data on new tenant rent agreements suggest that housing inflation broadly will continue to cool.”

“Continued disinflation will indeed require further progress in housing and non-housing services.”

“Labor market has moved into better balance.”

“Suspect strong population growth 'helps resolve the puzzle' of labor market growth and strong consumption even as inflation eases.”

“Important that wage growth be consistent with 2% inflation over time; US is moving back toward that kind of wage growth.”

“Anchored inflation expectations are evident in consumer and business surveys.”

“Expect consumption growth to slow some this year.”

“Consumer spending was soft in January and February, suggesting we are on track for lower consumption growth in q1 vs second half of 2023.”

“Expect GDP growth this year to be solid but slower than 2023 pace of 3.1%.”

“My baseline expectation is that further disinflation can be accomplished without a significant rise in unemployment.”

“Appears supply networks are adapting to port of Baltimore disruption.”

“New businesses are creating a lot of new jobs.”

“Around 150,000 jobs a month have come from new businesses.”

Market reaction 

At the press time, the US Dollar Index (DXY) was down 0.01% on the day to trade at 104.23.

 

 

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.


 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD extends the range play amid mixed cues

AUD/USD extends the range play amid mixed cues

AUD/USD consolidates below the 0.6500 mark on Tuesday and remains confined in a familiar range held over the past two weeks or so. Persistent geopolitical risks, US-China trade war concerns and a bullish USD sentiment continue to act as a headwind for the currency pair. That said, the RBA's hawkish stance and a positive risk tone seem to lend support to the risk-sensitive Aussie.

AUD/USD News
USD/JPY climbs back closer to 150.00; upside potential seems limited

USD/JPY climbs back closer to 150.00; upside potential seems limited

USD/JPY ticks higher, though any meaningful upside seems limited in the wake of rising bets for another BoJ interest rate hike later this month. Furthermore, concerns about Trump's tariff plans, the protracted Russia-Ukraine war and the recent decline in the US bond yields should underpin the JPY and cap the currency pair. 

USD/JPY News
Gold price edges higher on safe-haven demand; bulls seem non-committed

Gold price edges higher on safe-haven demand; bulls seem non-committed

Gold price attracts some buying during the Asian session on Tuesday amid reviving safe-haven demand on the back of Trump's tariff threats and geopolitical uncertainty. The XAU/USD, however, remains confined in a familiar range as traders keenly await this week's key US macro releases for cues about the Fed's rate-cut path.

Gold News
Ripple's XRP eyes new all-time high, key factors to consider after extending its uptrend by 25%

Ripple's XRP eyes new all-time high, key factors to consider after extending its uptrend by 25%

Ripple's XRP continued its rally with a 25% surge on Monday, stretching its monthly gains to over 430%. Following the recent uptrend, the remittance-based token now ranks #3 among top cryptocurrencies despite witnessing a mix of bullish and somewhat bearish investor actions in the past few days.

Read more
Trump warns BRICS over Dollar rival plans

Trump warns BRICS over Dollar rival plans

Donald Trump, the incoming U.S. President, has issued a strong warning to BRICS nations over their plans to challenge the dominance of the U.S. dollar in global trade. 

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures