Fed Vice Chair Philip Jefferson said in speech today that despite the lack of official data amid the ongoing U.S. government shutdown, private-sector indicators show the overall economy “has not changed much” in recent months. Growth continues at a moderate pace, while the labor market appears to be gradually cooling.
On inflation, Jefferson acknowledged that price growth remains elevated, but he attributed the “lack of progress in headline inflation” largely to tariff effects. He noted that underlying inflation measures continue to “make progress” toward target.
Jefferson reiterated his support for last week’s 25bps rate cut given the shift in risks toward weaker employment. He added that the policy stance remains somewhat restrictive but is now closer to neutral, making it sensible for the Fed to “proceed slowly” from here.
Looking ahead, Jefferson emphasized that future policy decisions will be made on a meeting-by-meeting basis. With the government shutdown likely to continue suppressing key releases before December, “this approach is especially prudent”.
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