Fed’s Kugler sees more tariff inflation coming, favors holding steady for some time

Fed Governor Adriana Kugler said she favors keeping interest rates unchanged “for some time,” citing a resilient labor market and rising inflation pressures from tariffs.

In a speech today, she noted that both headline and core inflation “have shown no progress in the last six months”. Instead, this week’s CPI and PPI report showed core goods prices are now driving inflation higher, “partially reflecting the pass-through of increased tariffs”. Kugler said she expects inflation to accelerate further through the second half of 2025 as “larger effects of tariffs are still coming”.

While acknowledging some moderation in broader economic activity, Kugler emphasized that the labor market remains stable and near full employment. She also flagged geopolitical risks as a potential wildcard for inflation in the months ahead.

Full speech of Fed’s Kugler here.