Federal Reserve Vice Chair Philip Jefferson said on Thursday that he supported last month’s US interest-rate hike, but saw no urgent need for another move at present, expecting inflation to remain at ‘elevated’ levels in the near term.
Bond yields encourage further caution
Jefferson said in prepared remarks for a speech scheduled before the University of Virginia’s Darden School of Business that any future adjustments to monetary policy should be guided by a careful assessment of data trends, evolving expectations and the balance of risks.
He said markets were ‘reassessing’ their expectations amid rising bond-market yields, adding that Federal Reserve officials would need to form their own judgment — which ‘could take more time’ — before deciding on the next move for interest rates. He added that the availability of more data could help provide a better understanding of these trends and determine the appropriate monetary-policy stance.
Federal Reserve raises rates by 25 basis points
The Federal Reserve raised its benchmark interest rate by 25 basis points to a range of 3.75%–4.00% at its September 15-16 meeting, alongside the release of projections indicating that another rate hike could be implemented before the end of 2026.
New York Federal Reserve President John Williams said on Tuesday that he saw no urgent need to raise interest rates as policymakers continued to assess more data, but added that he still expected a rate hike before the end of the year.
Financial markets broadly expect the Federal Reserve to leave interest rates unchanged at its scheduled October 27-28 meeting.
Inflation risks skew to the upside
Jefferson expects inflation to remain at ‘elevated’ levels in the near term before resuming its decline toward the Federal Reserve’s 2% target as the effects of energy-price shocks and other factors fade.
He added that the risks of inflation running above his projections were skewed to the upside because of geopolitical developments and stronger-than-expected aggregate demand. He described the risks facing economic activity and the labor market as ‘roughly balanced.’
Jefferson expects the economy to continue showing resilience by adding jobs and extending the economic expansion, which has continued for 6 and a half years.
