Multiple officials speak in unison! Federal Reserve's Cook: High inflation, interest rates to remain unchanged for now

According to the Zhitong Finance APP, Federal Reserve Governor Adriana Kugler recently emphasized that the current inflationary upward risks remain significant, a judgment that supports her stance on the Federal Reserve maintaining the key policy interest rate unchanged for now.

Kugler pointed out that the latest inflation data shows that price pressures continued unabated in January. She further mentioned that the core inflation indicators from the Federal Reserve, which will be released next week, are expected to remain above the Federal Reserve's target level.

In a speech on Thursday at Georgetown University in Washington, Kugler clearly stated, "This data clearly indicates that we have a long way to go to achieve the FOMC's set inflation target of 2%."

Her view aligns with several Federal Reserve officials who believe that the instability of inflation data and the uncertainties brought about by President Trump's economic policy plans are key factors for the current cautious adjustment of interest rates. In fact, at last month's meeting, policymakers kept the interest rate unchanged in the range of 4.25%-4.5%.

Kugler explained, "While the downside risks in the labor market have eased, the upward risks of inflation still exist, so I believe the current interest rate policy is appropriate."

Regarding the potential impact of new economic policies, Kugler stated that the net effect remains "highly uncertain," emphasizing that "it will depend on the scope, duration, market response, and most critically, the specifics of the measures taken."

When discussing the labor market, she stated that it is "healthy and stable," while the overall U.S. economy is "fundamentally solid."

In her speech, Kugler also delved into the economic concept of the Phillips Curve, which analyzes the trade-off between inflation and unemployment. She believes that incorporating indicators such as supply chain disruptions into the Phillips Curve model can more effectively explain the sharp rise in inflation following the COVID-19 pandemic.

She concluded, "An obvious lesson is that no single model can comprehensively reveal all possible states of the economy."

Federal Reserve Officials Speak Out: Uncertainty in Inflation Path, Cautious Policy Adjustments Needed

Recently, several Federal Reserve officials have expressed their views on monetary policy and economic outlook, emphasizing the uncertainty in the inflation path and the potential impact of Trump administration policies on the economy. Below is a summary of the core viewpoints from various officials:

St. Louis Fed President Alberto Musalem

Musalem emphasized that the Federal Reserve's monetary policy should remain "moderately restrictive" until inflation steadily returns to the 2% target. He warned that the process of inflation retreating could stagnate or even reverse, with risks skewed to the upside. Although the U.S. economy remains robust and the labor market strong, future adjustments in government policy could have substantial impacts on the economy. He pointed out that changes in trade, immigration, regulation, fiscal, and energy policies could significantly affect the economic path.

Atlanta Fed President Raphael Bostic

Bostic expects the Federal Reserve to cut interest rates twice in 2025 but acknowledges that policy uncertainty increases the difficulty of making predictions. He believes that the Trump administration's policies could have differing impacts on inflation and economic growth, and the Federal Reserve needs to remain patient and wait for more data to confirm trends. He also noted that businesses are taking a wait-and-see approach regarding potential new tariffs and tax policies from the Trump administration, concerned that changes in trade and immigration policies could increase operating costs San Francisco Federal Reserve President Mary Daly

Daly stated that although progress towards the 2% inflation target is slow, the Federal Reserve should continue to maintain the current tightening monetary policy until the downward trend in inflation becomes more evident. She emphasized that the Federal Reserve needs time to assess the impact of the Trump administration's policies on the economy, which may have either stimulating or suppressing effects on economic growth, labor supply, and inflation through different mechanisms.

Federal Reserve Governor Michelle Bowman

Bowman indicated that stronger confidence in the decline of inflation is needed before further rate cuts can be considered. She pointed out that there are still upside risks to the inflation path, and the process of returning to the 2% target is slow and uneven. She emphasized that the Federal Reserve needs to continue monitoring inflation data to ensure a sustained decline in inflation.

Federal Reserve Governor Christopher Waller

Waller stated that current economic data supports keeping interest rates unchanged, but if inflation performs similarly to 2024, policymakers may consider cutting rates again at some point in 2025. He also noted that January's CPI data may be influenced by seasonal factors and that further monitoring of the data is needed to confirm trends.

Philadelphia Federal Reserve President Patrick Harker

Harker pointed out that the current monetary policy is appropriately positioned, with economic growth and production remaining resilient and the labor market balanced. He believes that the Federal Reserve should wait for further improvement in inflation before considering adjustments to the policy rate.

Overall, Federal Reserve officials generally emphasized the uncertainty of the inflation path and the potential impact of the Trump administration's policies on the economy. They believe that the Federal Reserve needs to remain patient, waiting for more data to confirm trends, and maintain a balance between inflation and employment