Fed Can Takes Its Time on Rate Decisions, Says Fed Vice Chair
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Federal Reserve Vice Chair Philip Jefferson stated that the US economy's strength provides policymakers with the flexibility to carefully consider future interest rate adjustments, Bloomberg reports. His comments suggest a more cautious approach to further easing of monetary policy.
Delivering prepared remarks Wednesday at an event at Vassar College, Jefferson noted that the current level of short-term interest rates is appropriately positioned to achieve the Fed's dual mandate of maximum employment and price stability.
"While a cumulative cut in the policy rate by 100 basis points last year has brought the stance of monetary policy closer to a neutral setting, monetary policy continues to be restrictive," Jefferson said. "I believe that, with a strong economy and a solid labor market, we can take our time to assess the incoming data to make any further adjustments to our policy rate."
The Fed held its benchmark policy rate steady in January after implementing three rate cuts late last year. Several Fed officials have since signaled a reluctance to rush into further rate cuts, preferring to assess incoming economic data and the potential impact of President Donald Trump's economic policies.
Jefferson reiterated his expectation that the downward trend in inflation will be "bumpy," requiring careful monitoring and assessment.
He also commented on the overall health of household balance sheets, noting that high housing values and relatively low debt levels have placed households in a "good position." However, he acknowledged that low-to-middle-income households have less cash on hand compared to pre-crisis levels, making them more vulnerable to unexpected costs or economic shocks.
"Overall, American households currently possess a very high level of wealth that is driven by elevated house values, relatively low overall debt levels, and a strong stock market," he said. "That said, some households may have a difficult time weathering unexpected costs or economic shocks."