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Kugler says Fed should hold interest rates amid inflation risks

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Adriana Kugler, member of the Board of Governors of the US Federal Reserve, speaks on the economy in Washington, DC, US, on Wednesday, Feb. 7, 2024. 

Al Drago | Bloomberg | Getty Images

Inflation could prove sticky while prices might pick up again, Federal Reserve Governor Adriana Kugler warned, signaling that the U.S. central bank should keep interest rates steady for the time.

“I’m actually quite concerned about some of the persistence in inflation that we have been seeing,” she told CNBC’s Silvia Amaro during a fireside chat at the Conference on Monetary Policy Transmission and the Labor Market on Friday.

She pointed to a recent acceleration of inflation expectations, which she said she watches closely for their effect on how businesses set prices and how workers negotiate wages. This in turn means they could feed back into inflation.

Several recent data points have indicated concerns from consumers about prices increasing, with the latest Consumer Confidence Index from the Conference Board showing 12-month inflation expectations jumped to 6% in February, up from 5.2% the prior month.

“I have been one of those who has supported strongly any policy that really keeps inflation expectations well anchored. And I think that’s critical, and it has served us well,” Kugler said.

Looking ahead, the Fed’s Kugler indicated that prices could also rise again.

“I think you know there is reason to believe, potentially, that there could be price increases and more persistent inflation,” she said, adding that higher prices could come from “some of the policies that maybe are being considered and some that have already been put into place.”

Such policies could also impact economic activity, Kugler noted.

“We need to probably take account of some of this persistence that I mentioned, because of different categories of prices, because of inflation expectations, and potentially because some of the new policies that are ahead of us,” Kugler said.

Touching on the frequently changing developments surrounding the U.S. administration’s decision to impose tariffs on goods imported from key trading partners, including negotiations and potential retaliatory moves, the Fed’s Kugler said there was still “considerable uncertainty.”

Analysts and economists have widely indicated that they expect potential tariffs, and any reciprocal measures to bump prices higher for countries on both sides of the measures.

In prepared remarks Kugler gave at the conference, she likewise warned of inflation risks also weighing in on the outlook for interest rates from the Fed.

“Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2 percent target, it could be appropriate to continue holding the policy rate at its current level for some time,” she said in the address.

The Fed has cut interest rates three times since September, for a combined full percentage point, before holding steady in January. The bank’s overnight borrowing rate currently sits in a range between 4.25%-4.5%.

According to CME Group’s FedWatch tool, traders were last pricing in a 97% chance of the central bank also leaving rates unchanged when it next meets later this month. The picture then appears to become less clear, with an around 63% likelihood of rates also being held at the Fed’s May meeting, before tipping toward a rate cut in June.

Economics

Trump greenlights Nippon merger with US Steel

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A tugboat pushes a barge near the U.S. Steel Corp. Clairton Coke Works facility in Clairton, Pennsylvania, on Sept. 9, 2024.

Justin Merriman | Bloomberg | Getty Images

President Donald Trump said Friday that U.S. Steel and Nippon Steel will form a “partnership,” after the Japanese steelmaker’s bid to acquire its U.S. rival had been blocked on national security grounds.

“This will be a planned partnership between United States Steel and Nippon Steel, which will create at least 70,000 jobs, and add $14 Billion Dollars to the U.S. Economy,” Trump said in a post on his social media platform Truth Social.

U.S. Steel’s headquarters will remain in Pittsburgh and the bulk of the investment will take place over the next 14 months, the president said. U.S. Steel shares jumped more than 24%.

President Joe Biden blocked Nippon Steel from purchasing U.S. Steel for $14.9 billion in January, citing national security concerns. Biden said at the time that the acquisition would create a risk to supply chains that are critical for the U.S.

Trump, however, ordered a new review of the proposed acquisition in April, directing the Committee on Foreign Investment in the United States to determine “whether further action in this matter may be appropriate.”

This is breaking news. Please refresh for updates.

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Economics

A court resurrects the United States Institute of Peace

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The night the United States Institute of Peace (USIP) was taken over, March 17th, staffers from Elon Musk’s Department of Government Efficiency (DOGE) walked round its headquarters smoking cigars and drinking beers while they dismantled the signage and disabled the computer systems. The takeover of the USIP building in Washington, DC, earlier that afternoon was one of the more notable moments of President Donald Trump’s revolution in the capital, because the think-tank is not actually part of the executive branch. The Institute’s board and president, George Moose, a veteran diplomat, were summarily fired. He and other senior staff were ultimately forced out of the building at the behest of three different police agencies. Then a DOGE staffer handed over the keys to the building to the federal government.

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Economics

How much worse could America’s measles outbreak get?

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AMERICA’S MEASLES outbreak is alarming for several reasons. What began as a handful of cases in Texas in January has now surpassed 800 across several states, with many more cases probably going unreported. It is the worst outbreak in 30 years and has already killed three people. Other smaller outbreaks bring the total number of cases recorded in 2025 so far to over 1,000. But above all, public-health experts worry that the situation now is a sign of worse to come. Falling vaccination rates and cuts to public-health services could make such outbreaks more frequent and impossible to curb, eventually making measles endemic in the country again.

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