Governor of the Federal Reserve Council, Adriana Kugler, said at the end of Tuesday that together with American imports, much higher than expected and probably exerts pressure on prices, the Fed should maintain low -term costs of loans unchanged until the inflation risk is to reuters.
Key quotes
Tariff increases are much greater than previously expected.
The economic effects of tariffs and uncertainty may be greater than expected.
Supports the rate of constant maintenance policy until the risk of growth for inflation is continued, while economic and employment remain stable.
Fed policy well prepared for macroeconomic changes.
If the financial markets get stubbornly, this may be burdened with future growth.
Especially monitoring the risk of inflation growth, employment risk.
The progress of inflation has slowed down, above 2% of the goals.
The labor market is solid, basically in balance.
Long -term inflation expectations are largely well anchored, he hopes that they remain so.
GDP in the first quarter can show moderation vs. 2024, but some shopping loading to avoid tariffs.
Tariffs can exert pressure on price increases.
Market reaction
At the time of writing, the American dollar (DXY) trads 0.76% higher on trade day at 99.73.
Fed FAQ
The monetary policy in the USA is shaped by the Federal Reserve (FED). The Fed has two fines: to achieve price stability and support full employment. Its main tool to achieve these goals is to adjust interest rates. When prices rise too quickly and inflation is above 2% of the Fed target, it raises interest rates, increasing the cost of the loan throughout the economy. This causes a stronger American dollar (USD) because it makes the US a more attractive place for international investors to park their money. When inflation drops below 2% or the unemployment rate is too high, the Fed may reduce interest rates to encourage loans that are weighing on the green garden.
The Federal Reserve (FED) organizes eight political meetings a year, in which the Federal Committee of the Open Market (FOMC) assesses economic conditions and makes monetary political decisions. Twelve Fed-Siedmiu officials of the Governors’ Council, president of the Federal Reserve Bank in New York and four of the other eleven regional presidents of the Bank of Reserve, who serve annually on the basis of trading, took part in FOMC.
In extreme situations, the federal reserve may resort to a politics called quantitative draw (QE). QE is a process in which the Fed significantly increases the credit flow in the detained financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was a Fed weapon by choice during the great financial crisis in 2008. This includes Fed printing more dollars and using them to buy high -quality bonds from financial institutions. QE usually weakens the American dollar.
Quantitative twist (QT) is the opposite QE process, in which the federal reserve stops buying bonds from financial institutions and does not reinvest the capital from the bonds that it has in order to buy recent bonds. This is usually positive for the value of the American dollar.
