Fed’s Jefferson calls for holding rates steady until inflation cools further

Jennifer Schonberger
·Senior Reporter
2 min read
209

Federal Reserve vice chair Philip Jefferson on Monday became the latest central bank official to call for holding interest rates at current levels until inflation shows more signs of cooling.

"We continue to look for additional evidence that inflation is going to return to our 2% target,” Jefferson said during a question and answer session at the Cleveland Fed.

“Until we have that, I think it is appropriate to keep the policy rate in restrictive territory."

WASHINGTON, DC - JUNE 21: Philip Jefferson, nominee for Vice Chairman of the Board of Governors of the Federal Reserve System, testifies during a Senate Banking nominations hearing on June 21, 2023 in Washington, DC. Before being nominated to be the Vice Chairman, Jefferson served as a member on the Federal Reserve's Board of Governors since May 2022. (Photo by Drew Angerer/Getty Images)
Fed vice chair Philip Jefferson testifies during a Senate Banking nominations hearing on June 21, 2023, in Washington, D.C. (Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

Jefferson said he changed his view after hotter inflation data in the first quarter.

The Fed decided on May 1 to keep its benchmark interest rate in a range of 5.25%-5.50%, a 23-year high. Its next policy meeting is not until June 12, when the central bank is again expected to hold rates steady.

The Fed’s interest rate-setting committee said in its last policy statement that "in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective."

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

The next chance for more clarity comes this week with the first inflation reading for the beginning of the second quarter on Wednesday via the Consumer Price Index (CPI).

CPI for April is expected to show improvement, dropping to 3.6% from 3.8% in March on a "core" basis, which strips out volatile food and energy prices.

Various Fed officials reinforced over the last week that they will be taking a careful, measured approach to monetary policy as they digest hotter-than-expected inflation at the start of this year and evaluate whether that picture changes in the coming months.

Last week New York Fed president John Williams said "policy is in a very good place [now].” Minneapolis Fed president Neel Kashkari added, "I think it’s much more likely we would just sit here for longer than we expect." Chicago Fed president Austan Goolsbee noted: "I think now we wait."

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