Federal Reserve Governor Kugler: Inflation may rise, and the Federal Reserve should maintain interest rates unchanged

On March 10 local time, Federal Reserve Governor Adriana Kugler warned that U.S. inflation may still be stubborn, and commodity prices may rise again, so the Federal Reserve should temporarily keep interest rates unchanged. As one of the key decision-makers with voting rights, Kugler's cautious stance provides an important signal to the market regarding the future direction of Federal Reserve policy.

Last Friday, Kugler told CNBC reporter Silvia Amaro at the conference on monetary policy transmission and the labor market:

"In fact, I am quite concerned about the persistence of the inflation we are seeing.

Given the recent rise in inflation expectations and the fact that some core inflation categories have not yet moved towards the 2% target, it may be appropriate to maintain the current policy interest rate level for some time."

Kugler also pointed out that recent inflation expectations have accelerated, which will affect corporate pricing strategies and workers' wage negotiations, further pushing up inflation.

The latest data on the U.S. Consumer Confidence Index also confirms this concern: in February, consumers' inflation expectations for the next 12 months jumped to 6%, up from 5.2% the previous month.

Since September of last year, the Federal Reserve has cut interest rates three times, totaling a one percentage point reduction. According to CME Group's FedWatch tool, traders recently estimated a 97% probability that the Federal Reserve will keep interest rates unchanged at this month's meeting, with about a 63% chance of maintaining stable rates at the May meeting, and rate cuts may not begin until June.

Will U.S. Commodity Prices Continue to Rise?

Managing inflation expectations is crucial for economic stability. Kugler emphasized:

"I have consistently supported any policies that can effectively anchor inflation expectations. I believe this is essential and has already brought us positive effects."

Looking ahead, Kugler stated that prices may rise again:

"From the current situation, we have reason to believe that there may be price increases and more persistent inflation."

She added that some price increases may be related to policies being considered or already implemented:

"We need to seriously consider the persistence of inflation, as the price trends of different categories, changes in inflation expectations, and some new policies that will be implemented in the future may all impact inflation."