Tin tức thì trường
18.06.2024, 17:11

Fed's Kugler: Inflation progress to remain gradual, watching for signs of labor deterioration

Federal Reserve (Fed) Board of Governors member Adriana Kugler delivered a speech at the Peterson Institute for International Economics on Tuesday, noting that while inflation remains too high, recent inflation data has been encouraging. Fed Governor Kugler also made a point of cautioning that progress to inflation targets may be gradual.

Key highlights

Monetary policy is sufficiently restrictive, economic conditions are moving in the right direction.

It is likely appropriate to begin easing policy sometimes later this year if economy evolves as expected.

I am optimistic on productivity growth, with surge in new businesses, and AI likely to diffuse quickly.

Preponderance of labor market data show supply, demand coming into better balance.

Most indicators point to a slow, steady easing in labor market.

If wage growth continues to moderate, will soon be at levels consistent with price stability.

I am optimistic that improving supply, and cooling demand will support continued disinflation.

Further progress on inflation likely to be gradual.

Policy has more work to do, judgment will be guided by data.

I am watching closely for any signs of labor market deterioration.

Inflation is too high, but I am encouraged by the renewed recent progress & trajectory.

I expect some cooling of economic activity to continue.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

 

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