Progress towards the U.S. central bank's 2% inflation target has slowed recently and may have stalled, Federal Reserve Governor Adriana Kugler said on Wednesday, a reason to keep interest rates where they are.
"Recent disinflation has been slower, and the latest data indicate that progress toward the Federal Open Market Committee's 2% goal may have stalled," Kugler said in remarks prepared for delivery for an event at Princeton University.
In addition to that lack of progress, Kugler noted the recent rise in inflation expectations, and the "upside risks associated with announced and prospective policy changes," such as the import tariffs planned by the Trump administration.
Kugler said she would support keeping the Fed's benchmark policy rate in the current 4.25%-4.50% range "for as long as these upside risks to inflation continue," given ongoing economic growth and stable employment.
The job market does seem to be moderating, she said, but does not appear to be weakening significantly.
Kugler focused much of her speech on the role inflation expectations play in price-setting behavior among firms and wage demands in households.
The fact that inflation was recently so high, she said, meant expectations may be more sensitive to further price moves.
Measures of expectations have risen lately, Kugler said, something the Fed needs to watch. She said, however, that she took "some comfort from the much smaller increases in longer-term expectations" seen in some surveys and market-based measures.
The Fed held interest rates steady at its March 18-19 meeting, and central bank officials have said they want more clarity on the impact of President Donald Trump's policies. Fed policymakers' projections for the year, however, showed they expect higher inflation and slower growth than they did in December before the sweep of Trump's tariff plans became clearer.
