Federal Reserve Vice Chairman Philip Jefferson said he is concerned about further interest rate cuts, citing the ongoing economic uncertainty and the need for a careful approach to policy adjustments. While speaking at Lafayette College in Easton, Pennsylvania, recently, Jefferson stressed the importance of taking measured steps as the central bank navigates an evolving landscape of economic data and policy challenges.
In his remarks, Jefferson acknowledged that the U.S. economy remains strong, with inflation gradually easing from its peak and the labor market holding steady. But, he noted that it is important for the Federal Reserve to avoid rushing into major policy shifts.
“As long as the economy and labor market remain strong, I see it as appropriate for the [Federal Open Market] Committee to be cautious in making further adjustments,” he said in at Lafayette College, according to CNBC.
“Over the medium term, I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome,” Jefferson added. “That said, I do not think we need to be in a hurry to change our stance.”
The Federal Open Market Committee (FOMC), the Fed’s policymaking body, recently opted to keep interest rates steady, holding the federal funds rate in the range of 4.25 percent to 4.5 percent. This decision came after three consecutive rate cuts in 2024, following aggressive hikes aimed at combating high inflation. Jefferson’s remarks align with those of other Fed officials, who have emphasized the importance of staying patient while evaluating economic trends, Morningstar reported.
One of the key uncertainties weighing on the Fed’s decisions is the potential impact of U.S. government policies, especially in areas like international trade and tariffs. Jefferson pointed to ongoing negotiations with major trading partners, including China, as sources of uncertainty that could affect the broader economic outlook.
Looking forward, Jefferson suggested that the Fed may gradually reduce its policy restraint over the medium term, moving toward a more neutral stance.
Jefferson’s cautious stance reflects a careful balancing act by the Fed as it faces persistent inflationary pressures and uncertain policy conditions.
