Fed’s Jefferson Says Rates Well Positioned Amid Uncertainty

Federal Reserve Vice Chair Philip Jefferson. Photo by Alessandro Rampazzo /Photographer: Alessandro RampazzArticle content(Bloomberg) — Federal Reserve Vice Chair Philip Jefferson said the Iran war will stoke uncertainty and push US inflation higher in the near term, though the central bank’s policy setting remains appropriate.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentDescribing interest rates as broadly in a range that neither spurs nor restrains the economy, Jefferson said the current stance will support jobs and allow inflation to ease back to the 2% target as the effect of tariffs wanes.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle content“I remain cautious about my outlook,” Jefferson said Tuesday in prepared remarks for a speech at the University of Detroit Mercy. “Uncertainty about the economy is elevated, and the rise in energy prices and the conflict in the Middle East add to that uncertainty. I continue, however, to see our current policy stance as appropriately positioned to allow us to assess how the economy evolves.”Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentWhile Jefferson said he expects a broad disinflationary trend to continue, he sounded a cautious tone on how the Iran war will impact inflation and consumer demand, saying the conflict has complicated his own outlook for prices.Article content“The recent increase in energy prices, however, will apply some upward pressure on headline inflation, at least in the near term,” Jefferson said. “The ongoing trade policy uncertainty and geopolitical tensions pose upside risk to my inflation forecast.”Article contentFed officials have expressed growing anxiety over the US economic outlook due to the war in the Middle East which has sent energy costs soaring and threatened the supply of other key commodities. The Fed left interest rates unchanged at its March 17-18 policy meeting and cautioned about elevated uncertainty created by the war. Article contentArticle contentThe central bank is trying to balance inflation — which was about a percentage point above its 2% target in January and is set to jump due to oil prices — against a job market that has shown signs of stabilizing but generated very little hiring over the past year.Article contentBusinesses are already warning about the impact from the war. The US service economy expanded in March at a slower pace as employment shrank by the most since 2023. Input prices accelerated sharply, with executives citing the war for triggering fresh uncertainty about the economic outlook.Article contentJefferson also sounded a note of caution on the labor market, which he described as roughly in balance but vulnerable to the latest bout of uncertainty.Article content“If the current elevated level of uncertainty persists, there is a risk that firms’ reluctance to hire could also persist and hold down job growth for longer,” Jefferson said. “I will remain attentive to the pace of job growth going forward as I assess the extent of potential fragilities in the labor market.”Article contentRead Morea: Fed’s Williams Expects Little Change to Underlying InflationTrending Doritos at US$7 a bag ended up costing PepsiCo billions Retail & Marketing Canada's accountant shortage is starting to add up despite quieter tax season Personal Finance Canadian pension plans are so healthy that employers are taking a contribution 'holiday,' says Mercer Retirement William Watson: Open the highway, you crazy New Brunswickers! FP Comment Posthaste: Why Canadians will feel the squeeze of soaring gas prices more than Americans News Article contentEarlier on Tuesday, New York Fed President John Williams said the Fed’s interest-rate setting was “exactly where it needs to be,” allowing the central bank to respond if economic conditions change.Article contentPrivate CreditArticle contentIn a question-and-answer session following his speech, Jefferson acknowledged the potential for risks stemming from nonbank lending known as private credit. The sector has grown significantly but suffered investor redemptions in recent months amid high-profile blowups.Article contentPrivate credit, he said, “has not been through what we would call a full credit cycle, which means that some of the arrangements in that area of our financial system have not been tested” by an economic downturn.Article content“We will continue to watch this sector very closely to make sure that its impact does not threaten financial stability more broadly,” he said.Article content(Updates with additional Jefferson comments from 12th paragraph.)Article contentShare this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Doritos at US$7 a bag ended up costing PepsiCo billions Retail & Marketing Canada's accountant shortage is starting to add up despite quieter tax season Personal Finance Canadian pension plans are so healthy that employers are taking a contribution 'holiday,' says Mercer Retirement William Watson: Open the highway, you crazy New Brunswickers! FP Comment Posthaste: Why Canadians will feel the squeeze of soaring gas prices more than Americans News