Federal Reserve Board Governor Kuggler stated that policymakers must focus on both the Fed's inflation and employment targets, noting that the labor market is cooling down and the rate of decline in inflation towards the Fed's 2% target has slowed.

In a prepared speech on Thursday, Kuggler stated, "The persistent but slowing anti-inflation trend, combined with the cooling labor market, means that we need to continue focusing on the two aspects of our mission."

She said, "If there are any obstacles to progress or risks of re-accelerating inflation, pausing rate cuts would be appropriate. However, if the labor market suddenly cools down, policy rates should continue to be gradually reduced."

The Fed cut borrowing costs by 25 basis points last week, after a larger cut of 50 basis points in September.

Given the strong economy, persistent inflation concerns, and general uncertainty, several Fed policymakers this week urged caution in further rate cuts in their comments.

While Kuggler stated that slowing wage growth and anchored inflation expectations may allow for a further slowdown in price growth, she pointed out that stubborn inflation in housing and other categories could pose risks to further progress in the anti-inflation process.

Data released on Wednesday showed that the core CPI index (a measure of underlying inflation) excluding food and energy rose by 0.3% month-on-month for the third consecutive month. Overall CPI accelerated to 2.6% year-on-year.

Given this data, Kugler said she expects the preferred inflation indicator of the Federal Reserve, Personal Consumption Expenditures (PCE) price index, to rise by 2.3% year-on-year, with core PCE expected to rise by 2.8% year-on-year. The PCE data for October will be released later this month.

Most of Kugler's speech focused on the independence of the central bank and its importance in achieving positive economic outcomes.

She said, "In other economies, transparency is also seen as the foundation of monetary policy independence, and monetary policy independence is increasingly seen as leading to better policy decisions that focus more on the long-term health of the economy."

Her comments were made at a time when people were questioning whether Trump, who won the election, would try to limit the independence of the Federal Reserve. Fed Chairman Powell stated clearly last week that if Trump asked him to resign, he would not, insisting that the new president does not have the power to dismiss him or other senior Fed officials.

Editor/Lambor