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Federal Reserve Vice Chair Philip Jefferson said on Oct. 1 that inflation has remained too high for too long and that the risk of it becoming entrenched still exists, but more time may be needed to determine whether another rate hike is necessary. Jefferson emphasized that future policy adjustments should be decided through a close analysis of incoming data, changes in the economic outlook and the balance of risks.
Jefferson said U.S. economic activity and the labor market remain solid, while rising energy prices, a boom in AI investment and tariffs are all affecting the economy and should not be evaluated separately. He added that U.S. Treasury yields across maturities have risen further since the September meeting, suggesting investors are reassessing a changing macroeconomic environment, and said policymakers will continue to assess whether inflation can return to target quickly enough and what monetary policy stance is most appropriate as more data becomes available.
Nick Timiraos of The Wall Street Journal, often described as the Fed whisperer, said Jefferson’s remarks suggested the Fed could wait longer before raising rates again, aligning with the existing view of New York Fed President John Williams. According to Timiraos, two of the Fed’s top officials are effectively casting doubt on an October rate hike, even as investors had continued increasing bets on such a move until just a few days ago.