Adriana Kugler, a member of the Council of Governors of the US Federal Reserve, speaks of the economy in Washington, USA, Wednesday, February 7, 2024.
Al Drago Bloomberg Getty images
Inflation may be sticky, while prices may rise again, the Federal Reserve Governor Adriana Kugler warned, signaling that the US central bank should keep his feet on time.
“I'm really worried about the part of the durability of the inflation we saw,” said Silvia Amaro in CNBC during a chat at a conference on the transmission of monetary policy and the labor market on Friday.
She pointed to the recent acceleration of inflation expectations, which, she said, carefully observes their impact on the way of determining the prices of companies and how employees negotiate wages. This, in turn, means that they could return to inflation.
A few of the latest data points indicated consumers' fears about rising prices, with the latest Consumer trust indicator from the conference council showing 12-month inflation expectations increased to 6% in February, compared to 5.2% in the previous month.
“I was one of those who strongly supported all policies that really maintain well anchored inflation expectations. And I think it is critical and it served us well, “said Kugler.
Looking to the future, Kugler Fed pointed out that prices may also increase.
“I think you know that there is a reason to think that there may be increases in price and more permanent inflation,” she said, adding that higher prices may come from “some rules that may be considered, and some that have already been introduced.”
Kugler noticed that such policies can also affect business activities.
“We must probably consider the part of the durability I mentioned because of various price categories, because of the expectations of inflation and potentially because some of the new politicians that are ahead of us,” said Kugler.
By touching the frequently changing events regarding the US administration decision to impose tariffs on goods imported from key trading partners, including negotiations and potential retaliation movements, Kugler Fed said that there is still “significant uncertainty”.
Analysts and economists generally indicate that they expect potential tariffs, and all mutual means raising prices higher for countries on both sides of the funds.
In prepared comments Kugler gave at a conference, she also warned against the risk of inflation, which also consider the perspectives of interest rates from the Fed.
“Considering the recent increase in inflation expectations and key categories of inflation, which have not shown progress towards our 2 % goal, it may be appropriate to maintain the policy rate at the current level for some time,” she said in the address.
The FED has lowered interest rates three times since September, for a total full percentage point before it stayed on the fixed January. The bank's loan rate is currently in the range of 4.25%-4.5%.
According to CME group fedwatch toolTraders were recently valued in a 97% chance that the central bank also left unchanged rates when the next ones meet this month. It seems that the photo becomes less bright, and about 63% the probability of rates also takes place at the Fed's May meeting before leaning towards the reduction of the rate in June.