Fed's Kugler: Uptick in goods inflation 'unhelpful'

(Reuters) - Federal Reserve interest rate policy remains restrictive and well-positioned, Fed Governor Adriana Kugler said on Tuesday, but progress on bringing inflation back to the central bank's 2% target has slowed since last summer and the uptick in goods inflation seen in the latest data is "unhelpful."

The recent surge in inflation expectations reflected in surveys of American consumers also warrants close attention, Kugler said in remarks prepared for a U.S. Hispanic Chamber of Commerce event in Washington.

Based on readings of the Consumer Price Index and Producer Price Index released earlier this month, Kugler said it is estimated that the Personal Consumption Expenditures price index the Fed uses to guide its 2% target climbed at a 2.5% pace year-over-year in February, the same as in January.

"In certain subcategories there is evidence that inflation reaccelerated in recent months," Kugler said. "Importantly, while goods inflation was negative in 2024 - as was the norm before the pandemic - it has turned positive in recent months. This development is unhelpful because goods inflation has often kept a lid on total inflation and also affects inflation expectations."

Indeed, surveys such as the University of Michigan's monthly Consumer Sentiment Index have shown a notable upswing in inflation expectations tied to the Trump administration's plans for sweeping tariffs on goods imported to the U.S.

"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.

Kugler, whose term on the Fed Board of Governors will expire next year, said some economic data such as retail sales had shown softening activity early in the year, but that the labor market appears to have remained stable through February.

(Reporting by Dan Burns; Editing by Andrea Ricci)