Federal Reserve Vice Chair Philip Jefferson stated that interest rates are nearing a level that neither hinders nor stimulates the economy, placing officials in a favorable position to address evolving risks.
"In my view, our current policy stance puts us in a good position to determine the extent and timing of any further adjustments to the policy rate based on incoming data, the evolving outlook, and the balance of risks," Jefferson said in remarks prepared for an event on Friday in Boca Raton, Florida.
Jefferson has joined a growing number of Fed officials who, following three consecutive rate cuts through late 2025, believe the central bank's current interest rate setting is well-positioned to balance risks related to both employment and inflation. Only two Fed policymakers, Vice Chair for Supervision Michelle Bowman and Governor Stephen Milan, have argued that the central bank should not have paused its rate-cutting cycle this month.
Jefferson noted that recent data on service prices and housing costs indicate that inflation is on a path back to the Fed's 2% target. While goods price inflation has picked up, Jefferson said it is reasonable to expect that the price effects from tariffs will not persist for long.
He also stated that, although downside risks in the labor market have increased, he expects the unemployment rate to remain stable in 2026.
Based on the pricing of futures contracts, investors anticipate that Fed officials will keep interest rates unchanged when they convene in Washington from January 27-28. The median projection from forecasts submitted by Fed officials last month indicated one 25-basis-point rate cut for this year.
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