Fed’s Kugler Warns Tariffs Driving Inflation, Supports Holding Rates Steady

📌 Key Takeaways

• Fed Governor Adriana Kugler says interest rates should remain unchanged
• Tariffs from the Trump administration are adding inflation pressure
• PCE inflation projected at 2.5% for June; core at 2.8%
• Job market remains “stable,” with unemployment at 4.1%
• Next Fed meeting: July 29–30, no rate change expected

Kugler: Tariffs Threaten Inflation Outlook

Federal Reserve Governor Adriana Kugler said Thursday that interest rates should remain steady “for some time” due to rising inflation pressures, particularly from Trump administration tariffs now affecting consumer prices.

Speaking at a housing forum in Washington D.C., Kugler said the Fed’s restrictive policy stance remains essential to anchor inflation expectations and avoid long-term price instability.

“Inflation remains above the FOMC’s 2% goal and is facing upward pressure from implemented tariffs,” Kugler noted.

💡 Inflation Stubborn, Rates on Hold

The Fed governor cited recent CPI data, showing price jumps in import-heavy sectors. She projected June’s Personal Consumption Expenditures (PCE) price index will show a 2.5% increase, while core inflation is estimated at 2.8%, both higher than May’s levels.

“Both headline and core inflation have shown no progress in the last six months,” Kugler said, warning of additional price increases in the months ahead.

📊 Employment Still Strong, But Tariff Risks Loom

Despite the inflation concerns, Kugler noted the labor market remains stable, with unemployment at 4.1% and conditions close to full employment.

Still, she cautioned that higher tariffs on major trading partners, expected later this summer, could drive further inflation—putting monetary policy easing out of reach.

Read More: Bitcoin Climbs as Trump Softens Tone on Firing Fed Chair Powell

Fed Decision Looms, No Rate Cut in Sight

The Federal Reserve is set to meet again on July 29–30, and officials are widely expected to hold the benchmark rate at 4.25%–4.5%. That would mark the fifth straight meeting without a rate move, as the Fed waits to assess how much of the tariff-driven inflation is temporary vs. structural.

“Fed policymakers want to see if tariffs result in a one-time price jump or a lasting inflation surge,” analysts say.

Looking Ahead: Policy and Politics

Kugler, a Biden appointee, will complete her term in January 2026, potentially allowing the Trump administration to reshape the Fed if reelected. One possibility includes replacing Chair Jerome Powell, whose term ends in May.

This adds political weight to the Fed’s current pause, as policymakers navigate economic signals and election-year uncertainty.

💬 What Do You Think?

Will tariffs force the Fed to hold rates longer—or could inflation drop in the fall?
👉 Join the conversation below or share this article with your network!

Source