Fed Vice Chair Philip Jefferson said in a speech today while tariffs have added to price pressures, the impact has been “lower than what many forecasters predicted” this spring. Encouragingly, short-term expectations have eased from Q2 highs, while long-term expectations remain anchored. As a result, he expects the disinflation process to “resume after this year” and inflation to eventually return to the Fed’s 2% target “in the coming years”.
On the labor side, Jefferson highlighted softening conditions. He warned that the job market could “experience stress” if left unsupported, and said this was a key reason he backed a 25bp rate cut at the last FOMC meeting.
Looking ahead, Jefferson stressed that policy will remain data-dependent, with the Fed monitoring both economic indicators and government policies.
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