(Bloomberg) -- Federal Reserve Governor Adriana Kugler said it’s appropriate to keep the Fed’s benchmark interest rate where it is for some time, given a stable labor market, limited progress on inflation in recent months and uncertainty over the outlook for fiscal and trade policy.
“We reduced our policy rate 100 basis points through December, but the recent progress on inflation has been slow and uneven, and inflation remains elevated,” Kugler said in a speech Friday at the Economic Club of Miami.
In a moderated discussion following her remarks, Kugler said it is cautious and prudent for Fed officials to hold rates where they are for “some time.”
“Given that the economy is solid, given the fact that we haven’t achieved our 2% target, and given the fact that we may have uncertainties and other factors that may be pushing up inflation or may be reducing output and growth into the future,” Kugler said. The Fed aims for 2% inflation.
Following three consecutive interest-rate cuts, Fed officials left borrowing costs unchanged at their meeting last week, as they wait for inflation to cool further and more details on President Donald Trump’s plans on economic issues such as tariffs and immigration.
Kugler said Friday that there is “considerable uncertainty about the economic effects of proposals of new policies.”
She also said the US economy is on firm footing and that she expects solid economic growth in the first quarter of 2025. She called fresh jobs figures released Friday — which showed employers added 143,000 payrolls in January and a drop in the unemployment rate — “consistent with a healthy labor market that is neither weakening nor showing signs of overheating.”
“The labor market is stable, which gives us a little bit of time to make decisions,” she said. “By the same token, I have to say, in the past few months, we have seen the inflation rate moving sideways. It has firmed a little bit. So we’re paying attention to that.”
Productivity Pickup
Kugler devoted much of her speech to a strong streak of US productivity growth. She said the trend may be due both to temporary factors, such as job re-allocation and technological investments, and ones that may have more permanent effects, such as a jump in new-business formations.
Kugler, the first Hispanic person to serve as a Fed governor, said recent data indicate that Latinos account for a large share of new entrepreneurship, particularly since the Covid-19 pandemic.
“Of course, many of these Latino entrepreneurs are also immigrants, another group with a well-known proclivity for entrepreneurship,” Kugler said. “More entrepreneurs means more productivity, which is crucial to US prosperity.”
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