Federal Reserve Governor Adriana D. Kugler suggested on Wednesday that it might be suitable to maintain interest rates at their current level for an extended period in case "disinflation stalled."
During her speech at the Brookings Institution in Washington DC, the governor expressed optimism about the rapid progress of disinflation in the second half of 2023, but added that the policymakers' job "is not done yet." Kugler noted that geopolitical developments could pose "upside risks" to inflation in the period ahead, given the developments in Ukraine and the Middle East which could push commodity prices to rise and disrupt global trade.
Kugler pointed out that "continued" cooling of inflation and labor markets "without a marked rise in layoffs" could make it "appropriate" to reduce interest rates "at some point." "I expect consumer spending to grow more slowly this year than last, which should help with disinflation," she added.
