FLORIDA: Federal Reserve (Fed) vice-chair Philip Jefferson says interest rates are near the level that neither slows nor stimulates the economy, leaving officials in a good place to respond to evolving risks.
“In my view, the current policy stance leaves us well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook and the balance of risks,” Jefferson said last Friday in remarks prepared for an event in Boca Raton, Florida.
Jefferson joined a growing group of officials who – following three rate cuts to close out 2025 – have declared the Fed’s current rate setting is well positioned to balance the risks to both employment and inflation.
Just two policymakers, Fed vice-chair of supervision Michelle Bowman and governor Stephen Miran, have argued the central bank should not take a pause this month from cutting rates.
Jefferson said recent data on pricing for services and shelter costs suggest inflation is on a path toward the Fed’s 2% target. Goods price inflation has risen, but Jefferson said it’s reasonable to expect that the price effects from tariffs will not be long lasting.
The Fed governor said that while downside risks to the labour market have risen, he expects the unemployment rate will hold steady in 2026.
Investors anticipate officials will leave rates steady when they gather in Washington on Jan 27-28, according to pricing in futures contracts.
Policymakers pencilled in one quarter-point rate reduction for this year, according to the median projection submitted last month.
Jefferson also spoke about the resumption of asset purchases and management of the Fed’s US$6.6 trillion balance sheet.
He stressed that the new purchases were aimed at stabilising the level of bank reserves and should not be seen as an attempt to provide stimulus to the economy.
Speaking with reporters after his speech, Jefferson briefly addressed the controversy surrounding the Justice Department’s move to issue subpoenas to the Fed related to chair Jerome Powell’s congressional testimony in June about a Fed renovation project.
Powell issued a rare statement last night saying the move was motivated by objections to monetary policy decisions.
“I have great respect for the chair,” Jefferson told reporters on the sidelines of the conference. “I think that he is a person of the highest integrity.” — Bloomberg
