Fed Officials Highlight Ongoing Battle Against Inflation

By Ann Saphir

On Saturday, two prominent figures from the Federal Reserve expressed their belief that the ongoing effort to control inflation in the United States remains incomplete. Governor Adriana Kugler and San Francisco Fed President Mary Daly highlighted their commitment to addressing this economic challenge while emphasizing the need to protect the labor market.

The statements made by Kugler and Daly illustrate the careful balance the Federal Reserve must maintain this year, particularly as it considers slowing the pace of interest rate cuts. Last year, the Fed lowered short-term interest rates by one full percentage point, bringing them to a current range of 4.25%-4.50%.

According to the Fed's preferred inflation measure, inflation has notably decreased from its peak of around 7% in mid-2022 to a current rate of 2.4% in November. However, this rate is still above the Fed's target of 2%. In December, policymakers acknowledged that progress toward achieving this goal is likely to be slower than they had previously anticipated.

“We are fully aware that we are not there yet - no one is popping champagne anywhere,” Kugler remarked during the annual conference of the American Economic Association held in San Francisco. She added, “At the same time, we want the unemployment rate to stay stable and not rise rapidly.”

As of November, the unemployment rate stood at 4.2%, which aligns with both Kugler and Daly's definitions of maximum employment – one of the Fed's primary goals alongside price stability.

“At this point, I would not want to see further slowing in the labor market. Maybe we can expect some fluctuations month-to-month, but certainly no further slowdown,” Daly stated while appearing on the same panel as Kugler.

While both policymakers shared their insights on inflation and employment, they were not asked about the potential effects of incoming President Donald Trump's economic policies, which include tariffs and tax cuts. Some analysts speculate these measures could stimulate growth and potentially reignite inflation.

Overall, both Kugler and Daly's remarks reflect a cautious approach to navigating the economic landscape as the Fed strives to fulfill its dual mandate of stable prices and maximum employment.

Federal, Reserve, Inflation