This year's first Federal Reserve official states: It is difficult to assess the impact of Trump's policies; monetary policy will depend on economic data
Federal Reserve Governor Adriana Kugler stated in an interview with CNBC that future monetary policy will be based on economic data, and the impact of Trump's policies is difficult to assess. She mentioned that although the job market has cooled somewhat, the economic situation remains good, with the unemployment rate at a historical low. Kugler also pointed out that if the job market loses momentum, they will be prepared to adjust monetary policy. Richmond Fed President Thomas Barkin also stated that the uncertainty surrounding Trump's tariff policies will affect inflation risks
This Friday, Federal Reserve Governor Adriana Kugler stated in an interview with CNBC that the Federal Reserve is uncertain about how the economy will develop in 2025, and future monetary policy will be formulated based on upcoming economic data. Kugler has voting rights on the Federal Open Market Committee (FOMC) and is the first Federal Reserve official this year to publicly comment on monetary policy.
Given that the Federal Reserve predicted last month a reduction in the number of rate cuts in 2025, Kugler said, "There is a view that we can slow down and take a more gradual approach, while observing the data to determine whether stubborn inflationary pressures will begin to ease again."
However, if the resilient job market begins to lose momentum, a different monetary policy will be prepared:
"We have been responding to changes in the economy, focusing on what is happening right now. The current economic situation is good, although the job market has cooled somewhat, it remains resilient, and the unemployment rate is still at historically low levels."
Regarding the potential impact of the incoming Trump administration's policies on the economy, Kugler pointed out that it is difficult to determine how things will develop due to many uncertainties. She said, "There are many scenarios, and everyone is considering these scenarios."
At the Federal Open Market Committee meeting held in mid-December last year, the Federal Reserve lowered the target interest rate range by 25 basis points to between 4.25% and 4.5%. At the same time, policymakers lowered the expectations for rate cuts in 2025 and raised inflation forecasts, which raised many questions. Kugler stated, the U.S. economy ended 2024 on a strong note and hopes to see evidence that inflation is back on a downward trajectory.
Earlier that day, Richmond Fed President Thomas Barkin stated, "As the Trump tariff policy is finalized, uncertainty should decrease, while the risks regarding inflation are greater."
Barkin also indicated a preference to maintain restrictive policies for a longer period rather than thinking, "We have completed our task, so why not lower interest rates to neutral levels?"
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