Fed's Kugler, Daly: Inflation Control Not Yet Complete

Federal Reserve Governor Adriana Kugler and President Mary Daly have both emphasized that the job of taming inflation is not yet done, despite recent progress in reducing inflation rates. In their recent speeches, they highlighted the need for continued vigilance and data-dependent policy decisions to maintain a balance between controlling inflation and promoting economic growth.



Kugler, in her speech at the European Central Bank, acknowledged that inflation has declined significantly but noted that it remains too high. She expressed support for additional interest rate cuts, contingent on continued decreases in inflation, stating, "If progress on inflation continues as I expect, I will support additional cuts in the federal funds rate to move toward a more neutral policy stance over time." However, she stressed that any policy decisions would remain data-dependent, considering various economic indicators and potential risks.

Daly, in her speech at the Peterson Institute for International Economics, echoed Kugler's sentiments, stating that while inflation is still too high, there are reasons to be optimistic about continued disinflation. She cited factors such as declining price increases, anchored inflation expectations, and moderation of wage growth as contributing to the ongoing disinflation process. However, she acknowledged that further progress is likely to be gradual, with housing services inflation remaining persistent.



Both Kugler and Daly emphasized the importance of balancing inflation control with employment growth, aligning with the Federal Open Market Committee's (FOMC) dual mandate of price stability and maximum employment. They noted that the recent economic performance, marked by declining inflation and a cooling labor market, permits a more patient approach to monetary policy adjustments. However, they stressed that any policy decisions would remain data-dependent, considering various economic indicators and potential risks.

In their assessments of inflation control, Kugler and Daly emphasized several specific data points and indicators, such as inflation rates, core inflation, price adjustment frequency, inflation expectations, wage growth, and economic growth. They highlighted the importance of monitoring these indicators to assess the progress made in controlling inflation and to inform their views on the appropriate stance of monetary policy.

The views of Kugler and Daly on the appropriate monetary policy stance differ from the broader Fed consensus, as indicated by the recent decisions of the FOMC. While both align with the broader Fed consensus on balancing inflation control with employment growth, Kugler's view is more in line with the cautious approach taken by the FOMC, while Daly's view is more dovish, suggesting a more aggressive approach to rate cuts.

In conclusion, Federal Reserve Governor Adriana Kugler and President Mary Daly have both emphasized that the job of taming inflation is not yet done, despite recent progress in reducing inflation rates. They highlighted the need for continued vigilance and data-dependent policy decisions to maintain a balance between controlling inflation and promoting economic growth. Their views on the appropriate monetary policy stance differ from the broader Fed consensus, with Kugler's view being more cautious and Daly's view being more dovish. The ongoing debate among Fed officials regarding the appropriate pace of rate cuts underscores the importance of monitoring economic indicators and potential risks to inform policy decisions.