By Howard Schneider(Reuters) – Federal Reserve Vice Chair Philip Jefferson stated on Tuesday that the Federal Reserve could potentially continue to lower interest rates for the foreseeable future. This aligns with the central bank’s stance that policymakers should not feel pressured to rush into the next rate cut.
Speaking at Lafayette College in Easton, Pennsylvania, Jefferson emphasized that the U.S. economy is commencing the year on a positive note. He foresees a gradual decline in inflation rates and anticipates that both economic growth and labor market conditions will remain robust. Jefferson expressed his belief in a gradual reduction of monetary policy constraints on the economy in the medium term, moving towards a more neutral stance as the most probable outcome. He emphasized that while adjustments may be needed, there is no urgency to alter the current stance.
Asserting that maintaining caution is essential as long as the economy and labor market exhibit strength, Jefferson articulated that it is prudent to tread carefully when considering further adjustments. While he remains optimistic about the outlook for the year, uncertainties persist regarding government policies and their potential economic impacts.
In its recent policy meeting, the Federal Reserve kept its benchmark interest rate within the 4.25% to 4.5% range. Inflation continues to hover above the Fed’s 2% target, with minimal improvement observed over the past six months. Despite the Fed’s confidence in the gradual easing of price pressures in the economy, close monitoring is warranted to evaluate the overall impact of the Trump administration’s policies concerning tariffs, immigration, taxes, and other factors.
Currently, investors are anticipating a quarter-point reduction in the policy rate by the Fed in June, followed by another cut in December. (Reporting by Howard Schneider; Editing by Leslie Adler)
