(Reuters) -Federal Reserve Governor Adriana Kugler on Thursday said she supports keeping short-term U.S. borrowing costs at their current "moderately restrictive" level as long as tariffs continue to threaten to lift inflation.

"Disinflation has slowed, and we are already seeing the effects of higher tariffs, which I expect will continue to raise inflation over 2025," Kugler said in remarks prepared for delivery to the Economic Club of New York. "I see greater upside risks to inflation at this juncture and potential downside risks to employment and output growth down the road, and this leads me to continue to support maintaining the FOMC's policy rate at its current setting if upside risks to inflation remain."

Kugler's remarks, among the last of public comments from Fed policymakers ahead of their June 17-18 meeting, indicate that she sees inflation as the more pressing worry for the Fed. The central bank is widely expected to leave the policy rate in its current 4.25%-4.50% range for the next couple of meetings.

While trade and other policy changes from the Trump administration may increase the jobless rate from its current 4.2% level, she said, so far the labor market looks stable. April spending data and many surveys  -- including the Fed's own Beige Book, published on Wednesday -- show a softening in economic activity, she said, but "not yet a significant slowdown."

The inflationary effects of tariffs, on the other hand, are already evident in a reversal of core goods inflation, and research shows not only that tariffs have already added to overall price increases but are likely to continue to do so, and relatively quickly. Meanwhile short-term inflation expectations have increased, and though most readings of long-term inflation expectations have remained stable, she said she is closely monitoring the jump in the University of Michigan survey. 

"I view our current stance of monetary policy as well-positioned for any changes in the macroeconomic environment," she said.