Vice Chair Jefferson of the Fed: "May Need More Time to Decide on Additional Rate Hikes"

Fed Officials Urge Caution Following New York President

Expectations for October Rate Hike Fall Further

Kashkari: "We Will Take Necessary Actions to Lower Inflation"

Philip Jefferson, Vice Chair of the United States Federal Reserve (Fed), stated on the 1st (local time) that it may take more time to determine whether additional rate hikes are necessary. He explained that even though inflation has remained high for an extended period, multiple economic shocks are interacting, so indicators and forecasts must be closely examined.

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In a speech at the University of Virginia in Charlottesville, Virginia, Vice Chair Jefferson said, "Future policy adjustments must be made cautiously, based on indicators, trends, changing outlooks, and a careful consideration of risks." He added, "My colleagues and I must exercise independent judgment, and that may take more time."

This is in line with recent remarks by John Williams, President of the Federal Reserve Bank of New York, who said there is no need to rush additional hikes after last month's rate increase. President Williams, on September 29, predicted one more rate hike by the end of this year but stated there was no immediate need to act.

According to Bloomberg, the probability of a rate hike in October as reflected in federal funds futures markets dropped from about 70% at the start of the week to below 35% after President Williams' comments and the previous day's inflation data release. The probability fell further following Vice Chair Jefferson's remarks.

The Fed unanimously raised the benchmark interest rate by 0.25 percentage points at the Federal Open Market Committee (FOMC) meeting held on September 15–16. This was the first hike since 2023. At that time, the median of the interest rate projections indicated one more increase this year and another next year.

Vice Chair Jefferson assessed the September hike as a critical step to keep long-term inflation expectations stable. While he judged that economic activity and the labor market remain strong, he warned that inflation has lingered at excessively high levels for too long and that the risk of continued high prices remains.

He noted, "Since the September meeting, Treasury yields have risen further across maturities," interpreting this as "a signal that investors are reassessing the changing macroeconomic environment."

Vice Chair Jefferson identified rising energy prices, an investment boom in artificial intelligence (AI), and tariffs as shocks impacting the economy. He remarked, "There is no room to analyze each shock in isolation," and emphasized, "When determining policy to fulfill our dual mandate, we must consider the collective impact of these successive shocks on the economy as a whole."

Meanwhile, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, emphasized the Fed’s resolve to achieve price stability in a Bloomberg TV interview on the same day. He said, "We will do what is necessary to bring inflation back down to target," adding, "Ultimately, the question is how high rates need to go, and I do not know the answer."

President Kashkari stated that while a one-off supply shock may justify a temporary rise in prices, if such shocks persist for five years, it becomes the Fed's responsibility to bring down inflation.

However, he explained that he does not currently see the labor market as the main driver of inflation, and that a contraction in the labor market is not necessarily required to control prices.

This content was produced with the assistance of AI translation services.