Federal Reserve Vice Chair Philip Jefferson indicated he supports holding interest rates steady at the central bank's upcoming January meeting, citing a "cautiously optimistic" outlook for the U.S. economy.
Speaking in Boca Raton, Florida, on Friday, Jefferson suggested that previous rate cuts have positioned monetary policy in a neutral range, allowing the Fed to adopt a more patient stance.
A 'Wait-and-See' Stance on Policy
In his first public comments on monetary policy since November, Jefferson argued that the current policy is appropriate for evaluating future economic data.
"The current policy stance leaves us well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks," he stated.
This language closely mirrors the Fed's December post-meeting statement, which was widely interpreted as a signal that the central bank would pause its rate adjustments. The Fed's policy rate currently sits in a range of 3.50% to 3.75% following three consecutive quarter-point cuts. Jefferson was part of the 9-3 majority that voted for the last reduction in December.
He described last year's rate cuts as "the right step" to balance the risks of persistent inflation against the potential for a weakening labor market, adding, "This policy stance puts the economy in a good position moving forward."
Economic Outlook: Steady Growth and Cooling Inflation
Looking ahead, Jefferson laid out a stable forecast for the economy. He expects near-term growth to be around 2% and the unemployment rate to hold steady near its December level of 4.4%.
While acknowledging upside risks to inflation, he projected that it would return to a sustainable path toward the Fed's 2% target. He addressed the rise in core goods prices last year, attributing much of it to tariffs.
"It is a reasonable base case that the effects of tariffs on inflation will not be long-lasting—effectively, a one-time shift in the price level," Jefferson explained, noting that inflation expectations remain anchored.
Reflecting this sentiment, financial markets are currently pricing in only a 5% probability of another rate cut at the Fed's meeting on January 27-28.
