AFP – A United States (US) central bank official said yesterday she would support further interest rate cuts if inflation continues cooling, adding she is also eyeing effects from Hurricane Helene and unrest in the Middle East.
“If progress on inflation continues as I expect, I will support additional cuts in the federal funds rate,” said Federal Reserve (Fed) Governor Adriana Kugler in prepared remarks at the European Central Bank in Germany.
Her comments come weeks after the Fed slashed the benchmark lending rate for the first time since 2020, with more reductions expected down the line.
But Kugler stressed that her “approach to any policy decision will continue to be data dependent”.
“For instance, I am closely monitoring the economic effects from Hurricane Helene and from geopolitical events in the Middle East, since these could affect the US economic outlook,” she said.
In particular, if risks to employment escalate, it might be appropriate to lower rates more quickly.
Conversely, if data does not give policymakers confidence that inflation is moving sustainably towards their two per cent target, it might be appropriate to slow the pace of rate reductions.
While the Fed has kept a keen eye on inflation as it held interest rates at a decades-high level in recent months, it has shifted attention somewhat to the health of the labour market.
The central bank has a dual mandate from Congress to tackle both inflation and unemployment.
In September, hiring in the US blew past expectations while the unemployment rate ticked down to 4.1 per cent, offering relief to policymakers for now.
Hurricane Helene, which hit the Florida coastline on September 26 as a Category 4 storm, was the deadliest natural disaster to hit the US mainland since 2005’s Hurricane Katrina. The death toll is still rising.
