Two Federal Reserve officials emphasized last Saturday that the Fed must complete the battle against the surge in prices following the pandemic and achieve the 2% inflation target.

Mary Daly, the 2027 FOMC voting member and president of the San Francisco Fed, stated in a panel discussion that, despite significant progress made in reducing price pressures over the past two years, inflation remains "alarmingly above our target. "

Adriana Kugler, a Federal Reserve governor, expressed the same view at an event held by the American Economic Association in San Francisco.

"Clearly, our work is not yet done," she said. "We have not yet reached 2%, and we certainly still have to achieve our goal; we know the work is not complete."

Since last September, Federal Reserve officials have cut interest rates by a full percentage point. However, in light of the stagnation in the downward pace of inflation, they signaled last December their intention to adopt a more cautious approach in 2025. It is widely expected that Fed decision-makers will maintain stable interest rates at their meeting later this month.

Federal Reserve Chairman Powell stated that further interest rate cuts will require new progress in achieving the 2% inflation target. The Fed's preferred inflation Indicators grew by 2.4% year-on-year last November.

While expressing determination to reduce inflation, Daly and Kugler also noted that the Fed must continue to monitor the state of the labor market. Daly indicated that officials may soon face more trade-offs between the two goals (employment and inflation).

So far, the Federal Reserve's efforts to curb inflation have not significantly harmed the labor market. Although the unemployment rate in the USA has risen, last November's unemployment rate was historically low at 4.2%.

Daly said, "I do not want to see the labor market slow down further." She added that this could disrupt the general balance in the employment situation she currently sees.

"Therefore, although we absolutely must continue to bring the inflation rate down to the target of 2%—we must steadfastly do this, but we have to do it in a thoughtful way so that we can still support the goal of 'full employment,'" Daly said.

Kugler reiterated that she wants to ensure that the recent "fluctuations" in inflation data do not persist.

Editor/Somer