By Howard Schneider, Ann Saphir
(Reuters) -Two Federal Reserve policymakers on Tuesday said they believe inflation is heading down to the U.S. central bank’s 2% target and the job market is “solid,” even as neither gave any clear steer on whether they’ll support another interest rate cut later this month.
“I view the economy as being in a good position after making significant progress in recent years toward our dual-mandate goals of maximum employment and stable prices,” Fed Governor Adriana Kugler told the Detroit Economic Club. “The labor market remains solid, and inflation appears to be on a sustainable path to our 2% goal.”
And while she said the Fed is in the process of removing policy restraint, she did not indicate if she favors another quarter-percentage-point rate cut at the central bank’s Dec. 17-18 policy meeting, as anticipated by investors.
In an interview with Fox Business Network, San Francisco Fed President Mary Daly gave a similar read, and said that while a rate cut this month is “absolutely” not off the table, neither is it a sure thing.
“We have to continue to recalibrate policy – now, whether it will be in December or sometime later, that’s a question we’ll have a chance to debate and discuss in our next meeting,” she said. “I think we need to have an open mind here.”
Kugler and Daly said they will be looking closely at the release on Friday of the U.S. employment report for November to inform their decision, and both said they would be watching inflation data.
On Monday, Fed Governor Christopher Waller said he was leaning towards another rate cut this month. Fed Chair Jerome Powell on Wednesday will give what are expected to his last public remarks before the meeting.
Fed officials are trying to avoid giving too much guidance about how policy is likely to evolve, particularly since President-elect Donald Trump’s victory in last month’s U.S. election. Trump’s promises of import tariffs, tax cuts and an immigration crackdown could change the economic outlook in the coming months.
Both Kugler and Daly said it was too early to make any judgments about how those policies will affect the economy.
Kugler used the bulk of her speech to make one point relevant to the coming policy debate, arguing that a jump in immigration in recent years was a positive supply shock which, along with a rise in productivity, allowed the economy to grow faster than expected while inflation continued to decline.
Trump and other officials in his incoming administration have pledged to deport undocumented immigrants in a move that, depending on the scale, could disrupt some industries and change current price and wage dynamics. It is estimated that there are millions of such migrants in the country.
“The increase of workers was a positive shock and is notable because the underlying demographics of the U.S. heading into the pandemic were consistent with a slow-growing population and lower labor force participation,” Kugler said. “That dynamic got worse as the pandemic generated excess retirements and a fall in immigration.”
