New statements have come from FED officials regarding the future of monetary policy. FED Vice Chairman Philip Jefferson stated that inflation has been high for an extended period and the risk of it becoming permanent remains, adding that time may be needed to assess whether further interest rate increases are necessary.
Jefferson stated that future monetary policy steps should be carefully considered, taking into account trends in economic data, changes in the outlook, and the balance of risks. Noting that economic activity and the labor market in the US remain strong, Jefferson pointed out that multiple factors, such as rising energy prices, rapid growth in AI investment, and tariffs, are simultaneously impacting the economy.
The Fed Vice Chairman also said that following the September meeting, US Treasury yields had risen further across all maturities, indicating that investors were repricing the macroeconomic outlook. Jefferson stated that as new data becomes available, the Fed will continue to assess whether inflation can return to its 2 percent target quickly enough and what the appropriate monetary policy stance should be.
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Minneapolis Fed President Neel Kashkari also said that additional interest rate increases may be needed to bring inflation under control. However, Kashkari stated that he did not have a strong opinion on whether or not to raise interest rates at the October meeting.
Kashkari’s previous projection had called for a 25 basis point interest rate increase this year and another increase in 2027. However, Kashkari said that the US economy has performed stronger than expected since the September meeting and that inflation is still too high.
Kashkari stated that if economic growth remains unusually strong and inflation proves more resilient than expected, interest rates may need to be raised beyond current expectations, adding that a healthy labor market and a strong economic outlook suggest that current monetary policy “may not be particularly restrictive.”
Kashkari also stated that the recent volatility in financial markets does not pose a systemic risk and that the US Treasury bond market has been able to healthily accommodate the repricing of interest rate expectations.
*This is not investment advice.