US Federal Reserve Board member Adriana Kugler defended the Fed’s recent interest rate cuts as appropriate steps towards a more neutral policy stance, given what she described as currently “strong economic conditions”.
“I see the economy in good shape after making significant progress in recent years toward our dual goals of maximum employment and price stability,” Adriana Kugler told the Detroit Economic Club. “The labor market remains strong, and inflation appears to be on a sustainable path towards our 2% target.”
While she said the Fed was in the process of removing policy restrictions, she did not indicate whether she would prefer to cut interest rates by another quarter of a percentage point at the central bank’s policy meeting on December 17-18, as investors expected.
Kugler confirmed that she will look closely at the release of the US November employment report on Friday to inform her decision, and will monitor inflation data.
Kugler used the bulk of her speech to make one point relevant to the upcoming policy debate, arguing that the jump in immigration in recent years was a positive supply shock that, coupled with rising productivity, allowed the economy to grow faster than expected while inflation continued to fall.
“The surge was a positive shock, notable because the underlying demographics of the United States before the pandemic were consistent with slow population growth and low labor force participation,” Kugler said. “This dynamic has worsened as the pandemic has caused increased retirements and decreased immigration.”
