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Fed's Jefferson Recommends Patience for Next Interest Rate Decision

On February 19, Federal Reserve Vice Chairman Philip Jefferson stated that the U.S. central bank is in no rush to make a decision on its next monetary policy move, noting a strong economy and inflation slightly above target. Speaking at Vassar College, Jefferson emphasized the robust performance of the U.S. economy and highlighted the solid job market, coupled with elevated but decreasing inflation levels compared to the 2% target set by the central bank.

Expecting a gradual return to the target after last year's rate cuts, Jefferson expressed confidence in the current economic conditions, indicating a deliberate approach in evaluating data for potential policy adjustments. He characterized the existing monetary policy as "restrictive," with the federal funds target rate range at 4.25% to 4.5%, the primary tool for economic influence by the Fed.

In light of the Fed's decision to keep rates unchanged at the recent Federal Open Market Committee meeting, Jefferson refrained from offering specifics on future rate adjustments. Uncertainty surrounding President Donald Trump’s economic agenda, particularly concerns about inflation caused by policies like tariffs and deportation, presents challenges for policymakers and is seen as a potential obstacle to economic growth.

Jefferson also addressed the financial health of households, noting generally positive conditions with high asset values due to increased house and equity prices. However, he acknowledged that certain households, especially those with lower credit scores, might face difficulties due to limited financial reserves, making them vulnerable to unexpected expenses or economic downturns.