Federal Reserve Board of Governors member Adriana Kugler spoke about the current state of the economy and the objectives of the Federal Open Market Committee (FOMC) at the Weidenbaum Center in the Bryce Cave Moot Courtroom, Apr 3.

Kugler is a well-known economist and one of seven governors of the U.S. Federal Reserve, a role she was nominated to hold by President Joe Biden in April 2022. 

Kugler discussed the dual mandate of the Federal Reserve and their current objectives in the opening of her talk. 

“The Federal Open Market Committee has been working to lower inflation in the context of our dual mandate of maximum employment and stable prices,” Kugler said.

The Federal Reserve was established in 1913 with the objective of maximizing employment and minimizing inflation. The FOMC influences these two metrics of the economy by adjusting interest rates. 

Kugler noted that many Americans and news outlets place a heavier focus on the second part of the Fed’s mandate: minimizing inflation. 

She discussed the different strategies the Fed uses to measure inflation.

“Inflation can sometimes be hard to read, as [inflation] figures are volatile because food and energy prices move a lot,” she said.  

Because of the instability in inflation rates, Kugler said many economists focus on inflation measures that exclude food and energy prices. 

Kugler also said that inflation data from the winter holiday season, while showing positive metrics to the Fed, is skewed due to excess consumer spending during that period. 

The FOMC has reduced inflation by “tightening monetary policy,” a term that refers to the increase of interest rates, according to Kugler. The increases began in early 2022 and continued into 2023. 

She also mentioned that the recent bridge collapse in Baltimore is an example of a black swan event, a term that characterizes disasters that are difficult to predict and have drastic effects on activity. The collapse shut down the Port of Baltimore for weeks and has resulted in strains and excess shipping costs for many firms. 

“Global developments such as the war in Europe and the Middle East, and supply chain disruptions, like the recent bridge collapse in Baltimore, could spark an increase in commodity prices,” Kugler said. 

Kugler addressed shifts in labor demand in the U.S., which she said has risen and then fallen since 2021. 

“Labor demand was strong in 2021 and 2022,” Kugler said. “In fact, demand was so strong that the number of job openings relative to total employment was 50% above pre-pandemic levels, but the job-openings rate has declined roughly 30% since.” 

She discussed a decrease in wage growth within the U.S. economy, particularly in the services industry. Many jobs were created during and after the COVID recession, when interest rates were brought to historically low levels. 

Now that the FOMC has increased interest rates again, many companies have had to lay off employees and stop hiring. 

The talk was followed by a Q&A section. Kugler addressed an audience member who asked, “What advice would you give to students thinking about studying economics today?”

“Your personal economics and your personal experience can complement your technical skills,” Kugler said. “I think it’s important to not forget where you come from, and how you would view the world or how that informs your view of the world.”