Federal Reserve Gov. Adriana Kugler on Wednesday said she is not yet ready to start cutting interest rates even as inflation shows signs of cooling.
In remarks for a speech to the Brookings Institution in Washington, D.C., Kugler acknowledged the cooling interest rates. However, Kugler also said she wants more confidence that it is time to cut the interest rates before they do so.
"So I am pleased with the disinflationary progress thus far and expect it to continue. I must emphasize, however, that the [Federal Open Market Committee's] job is not done yet," she said in her first major policy address since being confirmed to the Board of Governors in 2023.
"At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce the target range for the federal funds rate. On the other hand, if progress on disinflation stalls, it may be appropriate to hold the target range steady at its current level for longer to ensure continued progress on our dual mandate," she added.
Kugler's statement was echoed by Federal Reserve Bank of Boston President Susan Collins who said cuts on interest rates will likely come "later this year" when they see more evidence the inflation will align with their target of 2%.
"Seeing sustained, broadening signs of progress should provide the necessary confidence I would need to begin a methodical adjustment to our policy stance," Collins said, as quoted by Bloomberg.
How Many Cuts Are Expected?
The Fed may do between two to three interest rate cuts this year, per Minneapolis Fed President Neel Kashkari. However, he also cautioned that it is still too early to say for sure.
"Sitting here today, I would say, two or three cuts would seem to be appropriate for me right now," Kashkari said during a CNBC "Squawk Box" interview. "But again, I don't want to prejudge things, but that's, that's my gut, based on the data we have so far."
The Fed hiked interest rates nearly a dozen times between March 2022 and January 2024 in hopes of curbing rising inflation rates. The hikes, however, led to soaring mortgage rates and a sluggish housing market.
