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Fed governor is optimistic about inflation control, rate cut expectations rise again.

TraderKnows
TraderKnows
07-17

On Tuesday, Federal Reserve officials publicly expressed optimism about controlling inflation, which has strengthened expectations for interest rate cuts once inflation is under control.

Adriana Kugler, a member of the Board of Governors of the Federal Reserve System, stated on Tuesday that she is cautiously optimistic about inflation returning to the Federal Reserve's 2% target, noting that price pressures are easing in the areas of goods, services, and housing.

In her remarks, Kugler mentioned that the Federal Reserve's confidence in having controlled the pandemic-induced inflation has strengthened, which is one of the prerequisites for cutting interest rates. She said, "We are now seeing more progress in all three areas. I am cautiously optimistic that we are making the kind of progress needed to get back to 2%."

While Kugler did not specify when they would be ready to cut interest rates during her speech at the National Association for Business Economics seminar, her comments were the strongest yet from a member of the Federal Reserve Board in Washington, indicating confidence that inflation is returning to the 2% prerequisite for lowering borrowing costs set by the Federal Reserve.

Kugler noted that recent data, including lower-than-expected inflation readings over the past three months, slowing wage growth, and a gradual balance between business demand for workers and the number of job seekers, all suggest that price pressures are easing.

She pointed out that the labor market has particularly "experienced significant rebalancing," with wage growth slowing and various indicators of labor demand returning to pre-pandemic levels.

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Inflation

Inflation refers to the phenomenon where the purchasing power of a country's (or region's) currency decreases, leading to a general rise in the prices of goods and services. It is reflected in the fact that, over a certain period, the same amount of money can only buy fewer goods and services.

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