Philip Jefferson says no urgency for Fed to act again on rates
Federal Reserve Vice Chair Philip Jefferson said Thursday that he saw no urgency for the US central bank to act again following last month’s interest-rate increase, according to Reuters. Jefferson’s remarks at the University of Virginia’s Darden School of Business come as financial markets reassess the economic outlook amid rising bond yields and elevated inflation pressures.
At its September 15-16 gathering, the central bank lifted its benchmark rate by a quarter-percentage point, moving it to a range of 3.75%-4.00%. Policymakers’ projections indicated one more increase before the end of 2026, though Jefferson emphasized that future policy adjustments will depend on careful examination of data trends, the evolving outlook, and the balance of risks.
“Any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks,” Jefferson stated in his prepared remarks. He added that his colleagues and he will need to come to their own judgment, which may take more time before deciding on the next move.
New York Fed President John Williams also indicated on Tuesday that policymakers had time to assess additional data, while still expecting another increase before year-end. Financial markets broadly expect the Fed to leave rates unchanged at its upcoming October 27-28 meeting.
Jefferson Balances Elevated Inflation Risks Against Economic Resilience
Jefferson expects inflation to remain elevated in the near term before resuming its decline toward the central bank’s 2% goal as the effects of energy and other price shocks fade. However, he noted that risks to his inflation forecast are tilted to the upside due to recent geopolitical developments and stronger-than-anticipated aggregate demand.
Risks to economic activity and employment remain roughly balanced, according to Jefferson. In his assessment, the ongoing expansion—which has already lasted six and a half years—is expected to persist as the economy continues to generate jobs and demonstrate underlying durability.
Minneapolis Fed President Neel Kashkari offered a slightly different view on Thursday, telling Reuters that additional rate increases would probably be necessary to restrain the economy through 2027. Kashkari said he was open-minded about whether the next move should come at the October 27-28 meeting or later, noting that he did not have a strong view on the timing.
Having supported last month’s borrowing-cost escalation with his vote, Kashkari foresees an additional quarter-point increase occurring later this year alongside a further similar hike in 2027. Since the September meeting, incoming data suggests the economy is performing even better than he anticipated while inflation remains too elevated.
Market Functioning Stays Stable Under Warsh Fed Expectations
Despite recent volatility and a sharp rise in long-term borrowing costs following the September rate increase, Kashkari reported that financial markets are functioning properly and the Treasury market has absorbed the repricing without disruption. He stated he is not seeing any evidence of systemic risk in markets, though he added that the banking sector bears close watching because of the rapid shift in borrowing costs.
Kashkari also pointed to the influence of monetary policy under Fed Chair Kevin Warsh on market behavior. Part of the movement in long rates over recent weeks reflects real economic developments, while another part signals that the Warsh Fed is genuinely serious about controlling inflation, according to Kashkari.
“I’ve got some confidence that inflation’s heading back down over the next couple of years to our 2% target, but shocks keep surprising us,” Kashkari said.
The Federal Reserve’s final meeting of the year is scheduled for December 8-9, following the policy decision expected after the October 27-28 gathering.