Federal Reserve Gov. Adriana Kugler said she “strongly supported” the Fed’s recent decision to cut interest rates by 50 basis points, signaling that she would support future rate cuts as well.
“I strongly supported last week's decision and, if progress on inflation continues as I expect, I will support additional cuts in the federal funds rate moving forward,” Kugler said Sept. 25 at the Harvard Kennedy School.
Following its two-day meeting, the Federal Open Market Committee on Sept. 18 lowered the federal funds rate to a range of 4.75% to 5%, marking the first time the central bank cut interest rates in more than four years.
When asked about the decision-making process behind that cut, Kugler said that “the data spoke to us clearly,” as “inflation is heading toward our 2% target, and by the same token, the labor market has cooled.”
The FOMC also signaled Sept. 18 that future rate cuts are to come, adjusting its median projection for the federal funds rate at the end of 2024 to 4.4%, down from a projected 5.1% in June. Furthermore, the committee projected for the federal funds rate to drop to 3.4% at the end of 2025 and 2.9% at the end of 2026.
Kugler said she also expects future rate cuts, contending that with “inflation moving towards (its) 2% target, together with the softening and cooling in the labor market, it actually makes sense to continue to do some cuts down the road.”
While the Fed should continue to focus on bringing inflation closer to 2%, “we should now shift attention to the maximum-employment side of the FOMC's dual mandate,” Kugler added. “The labor market remains resilient, but the FOMC now needs to balance its focus so we can continue making progress on inflation while avoiding unnecessary pain and weakness in the economy.”
