Federal Reserve (Fed) Vice President and Board of Governors member Phillip Jefferson acknowledged that ongoing risks to both sides of the Fed’s policy mandates are seeing growing risks. The labor market is showing fresh weakness, and inflation pressures continue to mount in underlying datasets, leaving the Fed in a difficult spot on rate policy-setting.
Key highlights
Less than ideal not to get jobs report, but look across array of data to assess the economy.
Trends across several data series suggest job market softening, could experience stress if not supported.
Decline in net immigration a major factor preventing more significant rise in unemployment.
Both sides of the mandate are under stress, with inflation above target and downside risks to employment increasing.
Recent cut moved policy closer to neutral while maintaining a balanced approach.
Tariffs are showing through in higher inflation for some goods, but expect disinflation to resume next year.
Removing “average” from the framework was important. It was hard to communicate what it meant.
Running inflation above target to make up for past misses turned out to be impractical.
I’m trying to understand as much as possible about AI and possible impact on productivity.
The Fed has enough information to do its job. We will be well informed going into the October meeting.
The response to tariffs has been muted so far, but possible that the price level adjustment will take longer than forecast.
Fed’s job is to be sure that the adjustment of tariffs does not translate into persistent inflation.
The Fed will hit its 2% inflation target.
Long-term inflation expectations are anchored around 2%.
