WASHINGTON: A senior US central bank official said in remarks prepared for delivery Tuesday that it might be apt to lower interest rates sooner rather than later if the job market cools “too much.”
“If the labor market cools too much and unemployment continues to increase and is driven by layoffs, I would see it as appropriate to cut rates sooner rather than later,” said Federal Reserve Governor Adriana Kugler.
Her comments to a seminar in Washington come as the Fed mulls the best time to start lowering interest rate after lifting the benchmark lending rate to its highest in over two decades.
As inflation surged in the wake of the pandemic, the central bank swiftly hiked rates to tamp down price increases, and is now seeking to bring it back to a two percent target.
Kugler said she expects it “will be appropriate to begin easing monetary policy later this year” if inflation continues to cool.
Fed’s Powell says US making ‘modest’ progress on inflation
For now, the job market has remained resilient although hiring has eased recently and the unemployment rate has ticked up.
Analysts widely expect the Fed to start lowering interest rates in September, with a bigger than expected slowdown in inflation reported last week fueling such optimism.
On Monday, Fed Chair Powell said recent data boosts the central bank’s confidence that inflation is coming down towards its two percent target.
But policymakers caution that they will remain data-dependent in making their decision.
“If incoming data do not provide confidence that inflation is moving sustainably toward two percent, it may be appropriate to hold rates steady for a little longer,” said Kugler.
The Fed’s next policy meeting is in late July.
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