Fed Vice Chair Jefferson: Time to Assess Data Before Interest Rate Cuts
Federal Reserve Vice Chair Philip Jefferson emphasized the strength of the economy, which enables policymakers to take time before considering further interest rate reductions.
He noted healthy household balance sheets bolstering consumer spending, while expressing concerns about financial strain among lower-income households.
"While last year's cumulative 100 basis point rate cut moved monetary policy closer to neutrality, it remains restrictive," Jefferson stated at Vassar College.
"With a robust economy and labor market, we can take time to evaluate data before adjusting the policy rate," he added.
After lowering rates three times in 2023, the Fed kept its benchmark rate unchanged in January. Several policymakers have indicated a preference for maintaining rates as they monitor inflation and President Trump's economic policies.
Jefferson reiterated his view that inflation will continue to decline "bumpily." He highlighted households' strong position due to high home values and low debt levels. However, he noted that low-to-middle-income households have lower cash reserves than before the 2008 crisis.
"Overall, American households have a high level of wealth, but some may face difficulties in weathering unexpected costs or economic shocks," Jefferson concluded.