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Federal Reserve Board Governor Adriana Kugler said late Tuesday that with US import tariffs significantly larger than expected and likely to put upward pressure on prices, the Fed ought to keep short-term borrowing costs unchanged until inflation risks recede, per Reuters. Key quotes Tariff increases are significantly larger than previously expected.Economic effects of tariffs and uncertainty likely to be larger than anticipated.Supports holding policy rate steady as long as upside risks to inflation continue, while economic activity and employment remain stable.Fed policy well-positioned for macroeconomic changes.If financial markets tighten persistently, it could weigh on future growth.Especially monitoring upside risks on inflation, downside risks on employment.Inflation progress has slowed, remains above 2% goal.Labor market solid, broadly in balance.Longer-term inflation expectations are largely well-anchored, hopes they remain so.First-quarter GDP may show moderation vs. 2024, but some front-loading of purchases to avoid tariffs.Tariffs likely to put upward pressure on prices.Facing potential shocks now, much related to tariffs and uncertainty.I don’t think the public is losing confidence in us.We have a lot of trust from the public; inflation expectations are anchored.Uncommon for bond yields to go up and the dollar to weaken, but don’t jump to the conclusion that we are no longer a safe haven.And I would certainly say that does not reflect on the Fed’s work.Wages are not putting inflation pressures on the services sector.So far, not seeing strong pressures in labor market as immigration declines.Paying close attention to agriculture and construction, where immigrants account for a large portion of workers.In those sectors wages are still consistent with 2% inflation. Market reaction  At the time of writing, the US Dollar Index (DXY) is trading 0.76% higher on the day to trade at 99.73. Fed FAQs Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price…

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Filed under: News - @ April 22, 2025 11:27 pm