US FOMC Member Kugler Speaks

Thank you, Robin. And thank you for the opportunity to speak with you today on the important topic of housing and how housing fits in with the broader economy. First, I want to step back and say that housing—our homes—has a central role in our lives beyond what statistical reports capture. Housing matters greatly for our welfare because shelter is a basic human necessity. Our homes—be it city apartments, farmhouses passed through generations, or suburban dwellings—are among the most significant places in our lives. In terms of household finances, housing is an important source of wealth for many American families. Housing also supports access to good jobs, because the jobs people can take depend on where they live and how far they need to commute. In addition, the housing sector matters a great deal to the economy as a whole, and it is an important channel through which monetary policy is transmitted. That is why I study it closely as a member of the Federal Open Market Committee (FOMC). From the perspective of the labor market, many workers have ties to housing-related sectors, including construction, real estate, and the mortgage finance industry. And because housing is a large fraction of household wealth, the housing market influences consumer spending. From the price-stability perspective, shelter has a large weight in measures of inflation. Specifically, shelter is currently 16 percent of the expenditures in the basket used to calculate the personal consumption expenditures (PCE) price index, which is the FOMC's preferred inflation measure. Today I will discuss several aspects of housing affordability in the U.S., a topic that I know is important to many of you, as it is to me. When studying affordability, it is important to distinguish between the cost of shelter, by which I mean the cost of occupying a home, and the costs of purchasing and owning a home. I will discuss each of these in turn, with the common theme being that both are elevated from a historical perspective. Next, I will discuss some supply and demand factors that explain how we got to this point and offer some tho Fed’s Kugler Says It’s Suitable To Keep Interest Rates Stable "For Some Time" Due To Low Unemployment And Rising Prices From Tariffs Fed's Kugler: Many reasons to expect larger tariff impact coming Fed's Kugler: A restrictive policy stance is important right now to keep inflation expectations anchored. Fed's Kugler: CPI shows inflation broadening across core goods.

Thank you, Barbara, and thank you for the invitation to speak to you today. It is an honor to join other members of the Federal Open Market Committee (FOMC) who have addressed the Economic Club of New York over the years.1 My subject is the current state of the U.S. economy, the economic outlook, and the implications for monetary policy. The short version is that the labor market appears resilient and stable and economic activity is continuing to grow, although at a more moderate pace than in the second half of last year. While the labor market is currently at or near the FOMC's goal of maximum employment, there is the prospect that trade and other policy changes could raise the unemployment rate and push employment away from our objective. These policies, especially higher import tariffs, could also raise inflation over the rest of this year. In fact, while progress toward the FOMC's goal of 2 percent inflation has continued, we have seen an escalation in goods inflation and data from surveys, and non-traditional sources point to some inflationary pressures as well. In addition to increases in U.S. import tariffs and retaliatory increases in the tariffs foreign countries apply to U.S. exports, other policy changes, either proposed or already underway relate to immigration, fiscal policy and regulation. Those policies could affect economic conditions, and since it is the FOMC's job to set monetary policy that is best able to achieve our mandated goals of maximum employment and stable prices, we must consider the effects of these policies. So far, we are beginning to see the impact only of higher tariffs on inflation. Still, thinking about the outlook requires consideration of how the economy could be affected by all these policy changes moving forward. Fed's Kugler: View current Fed policy as moderately restrictive Fed's Kugler: Expects reversal of imports surge in coming months to signal larger price increases. <=USD>:*KUGLER: SEE INFL. RISKS NOW, EMPLOYMENT RISKS DOWN THE ROAD *KUGLER: CURRENT POLICY WELL-POSITIONED FOR ECONOMIC CHANGES *KUGLER: IF HIGH TARIFFS STAY, MAY SEE LARGER INF. EFFECTS SOON *KUGLER: LABOR MARKET IN BALANCE WITH SOME SIGNS OF COOLING

Thank you, Olesya, and thank you for the invitation to speak to you today. It is such a pleasure to contribute to this conference. Our profession has increasingly recognized, especially after the Global Financial Crisis, that research in the interdisciplinary topics between macroeconomics and finance is indispensable both for monetary policy and for promoting financial stability. As a researcher myself, and having spent many years in academia, I place great value on the social contribution of research and its potential to improve policymaking. I want to express my appreciation for your efforts in using macro-financial data and theoretical models to enlighten us on several critical issues. For instance, let me cite a few topics of the conference that shed light on important issues: The work on the transmission of monetary policy to both households and firms provides insights into how policy decisions ripple through the economy, a topic I recently addressed in a speech at the University of Minnesota. In this speech, I discussed my approach to monitoring monetary policy transmission and highlighted some of its key elements, such as the long and variable lags associated with policy effects. The exploration of the neutral rate of interest—that which neither slows nor stimulates economic activity—provides another angle to this important concept. This is a topic I have addressed in previous remarks, and I am especially interested in the potential factors that can affect the neutral rate. The work on how and why financial conditions faced by firms and households change with data releases and underlying macroeconomic conditions also enhances our grasp of the complex interplay between economic indicators and real-world financial experiences. The research on the functioning of the Treasury securities market and how it is affected by regulatory constraints sheds light on a crucial aspect of our financial system. FED'S KULGER: MONITORING SHIFTS IN POSSIBLE LOWER DEMAND FOR U.S. ASSETS Fed's Kulger I'm watching to better understand the link between trade and market vulnerability. FED'S KULGER DOES NOT COMMENT ON ECONOMIC, MONETARY POLICY OUTLOOK IN OPENING REMARKS TO FED MACRO-FINANCE WORKSHOP IN WASHINGTON

Thank you, Stefano, and before I say anything else, congratulations to the Class of 2025! My family is here today, so let me acknowledge my husband Ignacio, my daughter Miri, my son Danny, and my parents who are watching from elsewhere. I start with family because I know it takes a village! So, I want to acknowledge the enormous accomplishment by the graduates and also by their families and friends who supported them through this journey. Let's give all of them a big round of applause! I also want to thank the leaders of Berkeley's economics program for giving me the privilege of returning here, as a graduate of this program, to be a part of what is, in fact, my very first economics commencement ceremony here at Berkeley. On a similar spring afternoon in 1997, when my classmates were walking across this stage, I was across the country, hurrying to finish my dissertation at the Brookings Institution and preparing to start my first job as an economist. I would have loved to be here, as you are, and I praise you for taking the time to share with your classmates, friends, and family this moment of recognition for the huge achievement today represents. But somehow, at the time of my graduation, I felt the need to get on with earning a living and moving forward with my life, as I am sure many of you are eager to do also. So, you can understand that this is a very special—and also a little strange— moment for me because it feels, in a way, like I am celebrating my own graduation 28 years later! I think it is also an unusual situation for all of you to listen to this speaker who was once where you are today. It is unusual because standing at this podium now is not just the person I have become in the decades since leaving Berkeley. Standing beside me, very close by today, is also the young woman I was in 1997, who was too busy to attend her own graduation. You will be hearing at times from both of us today, and we may even exchange a few words with each other. FED'S KUGLER DOES NOT COMMENT ON MONETARY POLICY, ECONOMIC OUTLOOK IN COMMENCEMENT SPEECH AT UC BERKELEY

Thank you, Reamonn. It is an honor and a privilege to be asked to speak in the beautiful country of Ireland and here at the Central Bank of Ireland. The histories of the U.S. and Ireland are intertwined. Our friendship is enduring, and our economies are closely tied. The Irish economy and the Bank stand as examples of the benefits of being open to international connections and the sharing of the best ideas and practices. I am delighted to have the opportunity to meet with my counterparts here and continue this great friendship. It is also wonderful to see many members of the National Association for Business Economics (NABE). NABE and its members have made many important contributions to the field of economics; as such, I always enjoy speaking to this esteemed group.1 I am particularly delighted to contribute to this conference on trade, technology, and policy. As an academic, part of my research has investigated the link between trade and productivity. And in my current role, I have highlighted these themes in several of my recent speeches, including the role of recent advancements in technology, such as artificial intelligence, as well as the role of business formation in terms of boosting U.S. productivity over the past few years.2 Today, I would like to focus my attention on the current outlook for the U.S. economy and how I am thinking about the path of monetary policy. Of course, given current developments, I will focus on the role played by trade policy and how it may affect the economy and productivity going forward. While the latest data show a resilient economy, I expect growth this year to be slower than last. Labor market conditions have been mostly stable. Inflation remains above the Federal Open Market Committee's (FOMC) 2 percent target, and further progress on disinflation has been slow. Looking ahead, I am monitoring the effects of changing trade policies Fed's Kugler: It's critical to keep long-term inflation expectations anchored. Fed's Kugler: Tariffs are likely to lead to slower growth, higher inflation. Fed's Kugler: Uncertainty around tariffs has already impacted the economy. Fed's Kugler: Policy stance is somewhat restrictive and well positioned.

FED'S KUGLER: OUR POLICY RIGHT NOW IS MODERATELY RESTRICTIVE Fed's Kugler: The labor market is stable and has been resilient

Thank you, Francine, and thank you to the Central Bank of Iceland for the invitation to speak to you today.1 My subject is the Federal Reserve's mandate of maximum employment. In the Fed's monetary policymaking, maximum employment and stable prices are linked in the mandate assigned to the Federal Reserve by U.S. law, which we refer to as the dual mandate. Icelanders, I know, are a seafaring people, and those here will understand what I mean when I say that the dual mandate is our "lodestar," a word our two languages share. It is our goal and our guide in setting monetary policy. There is an important distinction between our dual-mandate goals. For reasons that I will explain, while the Federal Open Market Committee (FOMC) has defined "stable prices" as 2 percent annual inflation, such numerical precision is not possible in defining maximum employment. Fed's Kugler: US Labor Market Is Stable, Close To Maximum Employment - Past 2 Recoveries Suggest 3.5% Unemployment Sustainable