Adriana D Kugler: The outlook for the economy and monetary policy

Speech by Ms Adriana D Kugler, Member of the Board of Governors of the Federal Reserve System, at the Brookings Institution, Washington DC, 7 February 2024. 

Central bank speech  | 
09 February 2024

I am very pleased to be speaking here at the Brookings Institution, one of the country's premier centers for policy discussion and analysis. As you all know, the Federal Open Market Committee (FOMC) has been working to lower inflation in the context of achieving our dual mandate of maximum employment and price stability.

Today I will discuss recent economic developments in the U.S., talk about how I approach our dual mandate, and explain how I view the current stance of monetary policy.

By way of introducing myself, my career in both academia and public service has included a focus on both labor markets and inflation. In my academic work, I have explored various aspects of labor markets-including the effects of labor market policies and the role of educational attainment, among other topics-as well as detailed measurement of productivity and prices. As the chief economist at the U.S. Department of Labor, I engaged regularly with the Bureau of Labor Statistics, which produces data on both employment and inflation. I have approached these topics through both a rigorous focus on measurement considerations and a broader view of the real-world experiences of the people who underlie the headline data. I will continue to do that as a member of the FOMC. With that background, I will now turn to recent economic developments and the outlook for this year.

The pace of inflation continues to slow. Twelve-month inflation, as measured by the personal consumption expenditures (PCE) index, was 2.6 percent in December, down from its peak of 7.1 percent in June 2022. And the six-month rate for PCE inflation was even lower, at 2 percent. While the FOMC uses PCE inflation for our 2 percent target, we also look to core PCE inflation, which excludes more volatile food and energy prices, as an indication of the underlying inflation trend. Core PCE inflation was 2.9 percent in December, also down from its high of 5.6 percent in February 2022, and six-month core PCE inflation was just 1.9 percent in December. We have made great progress. The slowing in total and core PCE inflation that we have seen over the past year or so is the most dramatic since the early 1980s-even though this progress has been uneven from month to month.