The Fed’s Kugler strongly supported Reuters’ half-percentage-point rate cut

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Federal Reserve Governor Adriana Kugler said on Wednesday she “strongly supported” the U.S. central bank’s decision to cut interest rates by half a percentage point as part of an emerging focus on the labor market.

“The labor market remains resilient, but (the Federal Open Market Committee) must now balance its focus so that we can continue to make progress on disinflation while avoiding unnecessary pain and weakness in the economy,” he said Kugler in remarks prepared to be delivered at Harvard. The event at the Kennedy School. “I strongly supported last week’s decision and if progress on inflation continues as I expect, I will support further cuts.”

Kugler did not elaborate on the expected pace of rate cuts, and specifically whether and under what conditions he might favor another half-percentage-point cut in borrowing costs at the Fed’s Nov. 6-7 policy meeting.

But she said she expected new inflation data on Friday to show price pressures continued to ease, with the main price index for personal consumption expenditures rising perhaps as much as 2.2 percent on an annual basis in August.

The Fed uses PCE data to set its 2% inflation target.

A former chief economist at the U.S. Department of Labor, Kugler said it is timely for the Fed to focus now on a labor market that has cooled but “remains resilient,” with an unemployment rate of 4.2 percent, which is ” still quite low by historical standards”.