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Investing.com -- Federal Reserve governor Adriana Kugler stated Thursday that interest rates should remain unchanged "for some time" as tariffs from the Trump administration begin affecting consumer prices.
Speaking at a housing forum in Washington D.C., Kugler emphasized that the current "restrictive policy stance is important to keep longer-run inflation expectations anchored" amid building inflation pressures and stable employment conditions.
With unemployment at 4.1%, Kugler described the job market as "stable and close to full employment." However, she noted that "inflation remains above the FOMC’s 2% goal and is facing upward pressure from implemented tariffs."
This pressure was evident in the recent Consumer Price Index report, which showed significant price increases across many heavily imported goods. Kugler expressed concern that these pressures would continue, particularly as the administration appears poised to impose higher tariffs on major trading partners in the coming weeks.
"I see upward pressure on inflation from trade policies, and I expect additional price increases later in the year," Kugler said. She projected that upcoming data will show the Personal Consumption Expenditures price index at 2.5% for June, with core inflation at 2.8%, higher than May’s figures.
"Both headline and core inflation have shown no progress in the last six months," she added.
The Federal Reserve is scheduled to meet on July 29-30 and is expected to maintain the benchmark interest rate at its current range of 4.25% to 4.5%. This would mark the fifth consecutive meeting without a rate change since the Fed paused rate cuts in December.
Fed policymakers have been reluctant to resume rate reductions until they can determine whether tariffs will cause only a one-time price adjustment or lead to more persistent inflation, despite President Trump’s desire for lower rates.
Kugler, who was appointed by President Joe Biden, will complete her term at the central bank in January. This will create a vacancy that the Trump administration might use to appoint a replacement for Fed Chair Jerome Powell when his term ends in May.
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