Fed officials continue to emphasize the need for cautious monetary policy.
Fed Vice Chairman Philip Jefferson said today that the economy is facing two challenging challenges simultaneously: a weakening labor market and above-target inflation.
Jefferson stated that the current outlook is characterized by high uncertainty, but that this uncertainty will diminish as the White House’s economic policies become clearer. “As these policies are gradually implemented,” Jefferson said, “we will have more time to assess their impact on the economy. I expect overall uncertainty to diminish.” He also commented on the interest rate path, stating that decisions will be made in light of current data, the balance of risks, and the impact of government policies.
Fed Dallas President Lorie Logan also offered a similar message of caution. Logan stated that monetary policy could be tightened only to a limited extent and that there should be no rush to cut interest rates. Arguing that the labor market remains fragile despite the balanced outlook, Logan said, “Stimulating demand increases price pressures but does not increase employment.”
Logan also noted that tariffs fuel inflation, and this impact could put upward pressure on long-term inflation expectations. He noted that upside risks to commodity prices persist, and that persistently high inflation in non-housing services is also a concern.
*This is not investment advice.