Fed Vice Chair Philip Jefferson joined a growing wave of central bank officials clouding the outlook for a rate cut at the December Federal Open Market Committee (FOMC) meeting, saying that labor market and inflation risks support a “prudent approach” to monetary policy.
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“The evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate,” Jefferson said on Monday. A neutral rate neither stimulates nor restricts economic growth.
Jefferson Warns of Higher Unemployment Rate
Jefferson expects the “relatively low” unemployment rate of 4.3% to tick higher by year-end. In addition, he noted that the Fed’s inflation goal of 2% has faced challenges due to the effect of tariffs. His base case is that the tariffs will result in a one-time jump in prices, with factors like final tariff rates, the extent of price pass-through to consumers, and the reaction of supply chains affecting the size and persistence of inflation.
Several other Fed officials have expressed uncertainty about a rate cut next month, with the odds of the 25 bps cut on CME’s FedWatch tool now at 42.6% compared to 62.4% a week ago and 93.7% a month ago.
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