Two Federal Reserve policymakers said Saturday they believe the U.S. central bank’s work to bring inflation under control is not yet done, but they also indicated they don’t want to risk harming the stock market. work trying to complete this work.
The remarks from Governor Adriana Kugler and San Francisco Fed President Mary Daly highlight the delicate balancing act facing America’s central bankers this year as they seek to slow the pace of their reduction of rates. The Fed cut short-term rates by a percentage point last year, bringing them to the current range of 4.25% to 4.50%.
Inflation by the Fed’s preferred measure is well down from its mid-2022 peak of around 7%, recording 2.4% in November. Still, that’s still above the Fed’s 2% target, and in December, policymakers were projecting slower progress toward that goal than they had expected.
“We are fully aware that we are not there yet: Nobody is putting champagne anywhere,” Kugler said at the American Economic Association’s annual conference in San Francisco, California. “And at the same time (…) we want the unemployment rate to stay where it is” and not increase quickly.
In November, the unemployment rate was 4.2%, consistent with his and colleague Daly’s view, with maximum employment the Fed’s second goal after its price stability goal.
“At this point, I would not want to see a further slowdown in the labor market – perhaps moving gradually in fits and starts over the course of a given month, but certainly not a further slowdown in the labor market,” said Daly, who was speaking at the press conference. same panel.
Policymakers were not asked, nor did they provide their views, on the potential impact of new President-elect Donald Trump’s economic policies, including tariffs and tax cuts, which some say could fuel growth and reignite inflation.