Federal Reserve Governor Kugler: Strongly supports last week's 50 basis point rate cut, will continue to support further cuts if inflation slows as expected

On Wednesday, Federal Reserve Board member Adriana Kugler stated that she strongly supports a 50 basis point rate cut at the September meeting if US inflation continues to slow as expected, indicating that further rate cuts would be appropriate.

Kugler pointed out that the Fed has been making progress in cooling inflation, coupled with a slowdown in the US labor market, signaling that it is time for the Fed to ease monetary policy and closely monitor its employment mandate. While the current labor market remains resilient, the Fed needs to strike a balance in order to make progress in reducing inflation while avoiding unnecessary pain and softness in the economy.

Kugler did not elaborate on the pace of rate cuts she expects next, especially whether she would support another 50 basis point cut in the Fed's policy meeting on November 6-7, and under what conditions a larger rate cut would be considered. Kugler and most of her colleagues voted last week to cut rates by 50 basis points, a magnitude that exceeded the expectations of many economists.

Kugler expects the latest PCE inflation data to be released this Friday to show continued easing of price pressures, with the overall personal consumption expenditure price index likely to rise by only 2.2% year-on-year in August.

Formerly the Chief Economist at the US Department of Labor, Kugler believes that the labor market has clearly slowed down, with hiring slowing and fewer resignations. Recent revisions to employment data have made it necessary for policymakers to assess a range of labor market indicators. Nevertheless, Kugler notes that the unemployment rate remains at historically low levels. In conclusion, after a period of labor shortages, the US labor market appears to have rebalanced