Fed Governor Kugler backs caution on rates; Kashkari expects only two or three cuts

cnbc.com:

Federal Reserve Governor Adriana Kugler said Wednesday inflation is showing solid signs of slowing down, but she is not ready yet to start lowering interest rates.

In her first major policy address since being confirmed to the Board of Governors in September 2023, Kugler said three factors are converging to ease inflation pressures: moderating wage growth, changes in how often companies are raising prices and survey indicators that the pace of price increases is expected to continue to fall.

With all that in mind, however, Kugler wants more confidence that it's time to cut rates.

«So I am pleased with the disinflationary progress thus far and expect it to continue. I must emphasize, however, that the [Federal Open Market Committee's] job is not done yet,» she said in remarks for speech to the Brookings Institution in Washington, D.C.

«At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce the target range for the federal funds rate,» Kugler added. «On the other hand, if progress on disinflation stalls, it may be appropriate to hold the target range steady at its current level for longer to ensure continued progress on our dual mandate.»

The policymaker added that she expects consumer spending to grow and core services inflation excluding housing to pull back. Additionally, she sees indications that firms which raised their prices frequently during the big inflation run-up of 2021-22 are doing so less now.

Should inflation continue to recede toward the Fed's 2% goal, that likely will lead to cuts later this year. However, like other Fed officials, Kugler did not commit to a timetable, despite market pricing for aggressive reductions ahead.

«It all depends,» Kluger said on the