Federal Reserve (Fed) Vice Chair of Supervision Philip Jefferson said Thursday evening that the current policy stance should continue to support the labor market and allow inflation to resume its decline.
Additional quotes:
Current policy stance leaves us well-positioned.
Labor market ‘roughly in balance’ but susceptible to adverse shocks.
Expect the unemployment rate to stay steady through 2026; risks to the labor market forecast are skewed to the downside.
Tariff policy uncertainty, a jump in energy prices, complicates the employment and inflation picture, at least in the short term.
Have expected disinflationary progress to resume once tariff effect fades, helped by productivity growth and deregulation.
Trade policy uncertainty and geopolitical tensions pose upside risks to the inflation forecast.
In the short term, expect overall inflation to move higher, reflecting a rise in energy prices.
Economy to expand around 2% or slightly faster this year, though with high uncertainty.
The increase in energy prices to date should have relatively modest effects on inflation.
A sustained energy price shock could have material implications.
Will monitor to see if higher costs become embedded in the economy.
Market Reaction:
The US Dollar (USD) sticks to modest gains following the comments and remains well supported by geopolitical uncertainties stemming from the Iran war.
