Fed Governor and Vice Chair Nominee, Philip Jefferson, has given a sobering assessment of the ongoing inflationary pressures that US economy is wrestling with. In a speech, he highlighted that, while inflation has decreased significantly since last summer, the high levels persist and progress in mitigating them appears to be slowing.

Jefferson made it clear that tackling inflation remains a substantial challenge. He stated, “While inflation has come down substantially since last summer, it is still too high, and by some measures progress has been slowing.” Moreover, he underscored that “outside of energy and food, the progress on inflation remains a challenge.”

The Vice Chair Nominee then offered a more granular perspective on core inflation, distinguishing between core goods inflation, housing services inflation, and nonhousing services inflation.

Jefferson noted, “Core goods inflation fell sharply over the second half of 2022 as supply-chain bottlenecks eased, but more recently it has stabilized at around 2.6 percent.”

Housing services inflation, which includes rent and the equivalent for owner-occupied homes, was another key point of discussion. He pointed out that “Housing services inflation, which is 8.2 percent on a 12-month basis. Housing is a big part of inflation, and while rent increases on new leases have come down considerably over the past year, it will take some time for this softening in rents to show through to the 12-month changes.”

As for nonhousing services, the largest component of services, inflation remains stubbornly high at around 4.5% with no substantial decrease in sight.

Full speech of Fed Jefferson here.

Dallas Fed Lorie Logan said in speech, “after raising the target range for the federal funds rate at each of the last 10 FOMC meetings, we have made some progress.”

Logan noted, “The data in coming weeks could yet show that it is appropriate to skip a meeting. As of today, though, we aren’t there yet.”

Addressing the inflation target, Logan emphasized the challenges that remain. “We haven’t yet made the progress we need to make. And it’s a long way from here to 2% inflation,” she remarked.

Dallas Fed President Lorie Logan emphasized the importance of a cautious approach to tightening monetary policy amidst uncertainty, suggesting that a slower pace doesn’t diminish commitment to achieving inflation goals.

Logan stated in a conference, “when conditions are uncertain, you may need to travel more slowly. But a slower pace of tightening shouldn’t signal any less commitment to achieving the inflation goal.” She further noted the potential for nonlinear deterioration of financial conditions, advocating for smaller, less frequent rate hikes to mitigate this risk.

Logan also underscored the multifaceted nature of monetary policy’s impact. She said, “The restrictiveness of monetary policy comes from the entire policy strategy – how fast rates rise, the level they reach, the time spent at that level and the factors that determine further increases or decreases.”

Seaprately, New York Fed President John Williams highlighted the time lag between policy decisions and their full impact on the economy, underlining the importance of monitoring the economy’s behavior post-decision. “We’ve got to make our decisions and then watch what happens, get that feedback, see how the economy’s behaving,” Williams explained.

In another occasion, Chicago’s Austan Goolsbee, however, indicated it may be too soon to discuss rate cuts or changes to monetary policy. He said, “I think it’s far too premature to be talking about rate cuts and premature to be saying — even for the next meeting — are we going to pause? Are we going to raise? Are we going to cut.”

Cleveland Fed President Loretta Mester signaled her cautious approach towards interest rate adjustments. She emphasized her desire for the policy rate to reach a level where the next policy change could be equally a potential increase or decrease.

Mester stated at a conference today, “The approach I’m taking is that I would like the policy rate to get to a point where, when I’m thinking about what would the next policy change be, I want it to be equally a potential increase versus a decrease.”

Mester further clarified her stance, indicating that once the desired policy rate is achieved, she envisions a period of stability. “When we get the policy to that rate, I think we’re going to be holding for a while in order to make sure that the interest rate is coming back down. So I don’t put it in terms of a pause, I put it in terms of a hold.”

However, she noted that current data doesn’t suggest that this rate has been reached yet. Expressing a need for more evidence of inflation trending downwards, Mester insisted on the importance of adhering to the current policy strategy. She said, “I need to see more evidence that inflation is still moving down. I think that we just have to stick with what we’re doing.”