Fed's Kugler: Labor Market Thriving, Inflation Elevated

The Federal Reserve's Vice Chair, Lorie Kugler, recently shared her insights on the current state of the U.S. economy, highlighting the robustness of the labor market and the persistence of elevated inflation. In a speech delivered on February 15, 2025, Kugler emphasized the need for a balanced approach to monetary policy, aiming to support maximum employment while maintaining price stability.



The labor market has shown remarkable resilience, with job gains averaging 380,000 per month since mid-2022. The unemployment rate has remained at historical lows, and nominal wage growth, while still elevated, has been slowing. This strong labor market performance is a testament to the economy's underlying strength and the Fed's commitment to supporting maximum employment.

However, Kugler acknowledged that inflation remains a concern, with the PCE price index increasing 4.7% over the 12 months ending in January 2025. Core PCE prices, which exclude volatile food and energy prices, also increased 4.7% over the same period. While supply chain bottlenecks have eased, and energy prices have declined, inflation has not yet returned to the Fed's 2% target.



Kugler emphasized the importance of addressing inflation without causing unnecessary job losses. She noted that the Fed has been raising interest rates and reducing its securities holdings to tighten financial conditions and bring inflation back to its target. However, she also acknowledged the need to monitor the labor market closely and assess the economic data as it becomes available.

In conclusion, Kugler's remarks highlight the Fed's commitment to balancing its dual mandate of maximum employment and stable prices. The labor market has shown remarkable strength, but inflation remains a concern. As the Fed continues to monitor the economy and adjust its policies accordingly, investors should remain vigilant and adapt their portfolios to reflect the evolving economic landscape.

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