Vice Chair Jefferson says Fed in position to ‘proceed carefully’

Federal Reserve Vice Chair Philip Jefferson said in a speech at the National Association for Business Economics in Dallas, Texas: “After increasing the target range for the federal funds rate by 525 basis points since early 2022, my view is that the FOMC is in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary. We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive. The balancing of these two risks was a good reason for holding the policy rate constant at our most recent FOMC meeting. As I mentioned earlier, real long-term Treasury yields have risen recently. In part, the upward movement in real yields may reflect investors’ assessment that the underlying momentum of the economy is stronger than previously recognized and, as a result, a restrictive stance of monetary policy may be needed for longer than previously thought in order to return inflation to 2 percent. But I am also mindful that increases in real yields can arise from changes in investor’s attitudes toward risk and uncertainty. Looking ahead, I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy. I will be taking financial market developments into account along with the totality of incoming data in assessing the economic outlook and the risks surrounding the outlook and in judging the appropriate future course of policy.”