MNI: Fed Easing Likely Appropriate Later This Year - Kugler

Federal Reserve Governor Adriana Kugler on Tuesday repeated it will likely be appropriate to begin easing interest rates "later this year," adding continued labor market rebalancing suggests inflation will continue to move down toward the Fed's 2% target.

"If economic conditions continue to evolve in this favorable manner with more rapid disinflation, as evidenced in the inflation data of the past three months, and employment softening but remaining resilient as seen in the past few jobs reports, I anticipate that it will be appropriate to begin easing monetary policy later this year," Kugler said according to prepared remarks.

"Despite a few bumps at the beginning of the year, inflation has continued to trend down in all price categories. But inflation remains above our target. I do believe that supply and demand are gradually coming into better balance."

On the labor supply side, the increased entry of prime-age workers and immigration have both helped to expand the labor force and compensate for excess retirements during the pandemic, she said. "This continued rebalancing suggests that inflation will continue to move down toward our 2% target." (See: MNI INTERVIEW: Fed Cuts Near, Hiring Weaker Than Appears - Wilcox)

"The labor market likewise has seen substantial rebalancing and nominal wage growth moderating as a result—even while keeping up with inflation," Kugler said.

If the labor market cools too much and unemployment continues to increase and is driven by layoffs, Kugler said it would be appropriate to cut rates sooner rather than later. "Alternatively, if incoming data do not provide confidence that inflation is moving sustainably toward 2%, it may be appropriate to hold rates steady for a little longer," she said in her speech to the National Association for Business Economics.