(March 25): Federal Reserve governor Adriana Kugler expressed support for holding interest rates steady for “some time,” while highlighting a move up in some measures of Americans’ inflation expectations.

Kugler noted an uptick in goods inflation in recent months along with survey data from the University of Michigan showing a pickup in both short-run and long-run price expectations, amid heightened economic uncertainty due to President Donald Trump’s implementation of new tariffs on US trading partners and his threats to impose more.

“I am paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past few years,” Kugler said Tuesday in prepared remarks for an event in Washington.

The University of Michigan’s preliminary March survey showed consumers expect prices to increase at an annual rate of 3.9% over the next five to 10 years, the highest in more than three decades.

Fed chair Jerome Powell at a press conference following the central bank’s meeting last week called inflation expectations “mostly well anchored” and said the University of Michigan figures were an “outlier” compared to other assessments of longer-run inflation expectations.

At that meeting, the Federal Open Market Committee left its benchmark policy rate unchanged in a range of 4.25% to 4.50%, a level Kugler said Tuesday she sees as continuing to have a restrictive effect on the US economy.

“I judge that FOMC policy is well positioned,” Kugler said. “The committee can react to new developments by holding at the current rate for some time as we closely monitor incoming data and the cumulative effects of new policies.”

Kugler also said that progress on continuing to lower inflation from the multi-decade highs reached in 2022 “has slowed since last summer,” adding that some categories of prices are seeing evidence of a re-acceleration in recent months.

“Importantly, while goods inflation was negative in 2024 — as was the norm before the pandemic — it has turned positive in recent months,” she said. “This development is unhelpful because goods inflation has often kept a lid on total inflation and also affects inflation expectations.”

She noted recent data on economic activity had “shown some signs of softness,” like a decline in retail sales in January, but added it may reflect factors such as weather disruptions and seasonal adjustment issues. She described the labour market as stable.

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