News

By Michael S. Derby

(Reuters) - U.S. Federal Reserve Governor Adriana Kugler said on Friday that rising inflation risks argue for an extended period of steady central bank interest rate policy.

“Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2% target, it could be appropriate to continue holding the policy rate at its current level for some time,” Kugler said in the text of a speech prepared for delivery before the Conference on Monetary Policy Transmission and the Labor Market held in Lisbon by the Banco de Portugal.

“Going forward, I will continue to closely monitor the effects of policies on the economy, and I will carefully assess incoming data, the evolving outlook, and any changes in the balance of risks” when thinking about the future direction of monetary policy, she said.

Kugler spoke as Fed officials are about to enter their customary quiet period ahead of their March 18-19 Federal Open Market Committee meeting. There, officials are widely expected to maintain their overnight target rate range that now stands between 4.25% and 4.5%. While some Fed officials have kept the door open to rate cuts later in the year, inflation pressures, which could worsen due to President Donald Trump’s pursuit of trade tariffs, have been casting a cloud over that path.

Kugler, in her remarks, noted that the public is growing more worried about future price pressures.

“Notwithstanding the well-balanced labor market, there are important upside risks to inflation. Some measures of inflation expectations have risen significantly in the past couple of months,” she said.

Kugler also said the U.S. jobs market is now in balance and that wage pressures are not a key driver of inflation. She said, “I am closely monitoring any signs of changes in the labor market so that we can keep it in the good place that it is now while bringing down inflation to our target.”