“With inflation and employment potentially moving in opposite directions down the road, I will closely monitor developments as I consider the future path of policy,” Kugler said in remarks prepared for a Dublin speech, noting that tariffs between the US and China remain “pretty high.”
The agreement will see US levies on Chinese imports trimmed to 30% by Wednesday, down from 145%, and China will reduce its own charges on US goods from 125% to 10%.
Kugler appeared to indicate the Fed will still need to ease rates, although potentially by lower than originally thought.
“My basic outlook, in some sense, may have changed in terms of the extent to which we need to use our tools, the magnitude, but not in the direction,” she said.
Expect Fed cuts in 2025 – just fewer
Traders expect rate cuts are still on the way but only anticipate two reductions this year by a cumulative 56 basis points, with the first cut slated to arrive in September. Last week, they expected the Fed to cut by nearly 75 basis points before the end of 2025.