Source: AFP
A senior Federal Reserve official said on Tuesday that she is optimistic about the US central bank’s progress on inflation and expects that it will be appropriate to start cutting interest rates this year.
The Fed raised interest rates to a two-decade high as it tries to reduce inflation toward its long-term goal of 2 percent.
It appeared to be winning the race until the first quarter of this year, when progress stalled, prompting Fed policymakers to reduce the number of rate cuts this year from three to just one.
However, speaking on Tuesday, Fed Governor Ariana Kugler said she remained “optimistic that improving supply and falling demand will support continued deflation.”
“I think economic conditions are moving in the right direction,” he told an audience in Washington in prepared remarks.
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“If the economy plays out as I expect, it will likely be appropriate to begin easing policy sometime later this year,” added Kugler, who is a permanent member of the U.S. central bank’s rate-setting committee.
Kugler said long-term inflation expectations “remained well anchored,” while there were signs lower-income consumers were pulling back from shopping, prompting some businesses to cut prices.
Businesses are also reporting a slowdown in the costs they face, including a slowdown in wage growth, “consistent with a labor market where supply and demand are coming into better balance,” he added.
The Fed has a dual mandate to address both inflation and unemployment, and has focused heavily on reducing inflation even as the labor market has remained resilient.
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Recent data shows a slight easing in some corners of the labor market — though the unemployment rate remained near historic lows.
Kugler also said she was optimistic about productivity growth, which has the potential to boost economic growth without fueling inflation, and added that she believed monetary policy was “tight enough” to help calm the U.S. economy. USA.
Against this backdrop, it reiterated its earlier expectation that it would be appropriate to cut interest rates later this year, subject to the caveat that it would continue to be “data driven” in the coming months.
Source: AFP