Federal Reserve’s Jefferson Calls for Cautious Approach to Interest Rates Amid Economic Uncertainty

Federal Reserve's Jefferson Calls for Cautious Approach to Interest Rates Amid Economic Uncertainty

In a recent speech delivered in Frankfurt on Friday, November 7th, Federal Reserve Vice Chairman Jefferson emphasized the need for a cautious approach to future interest rate adjustments. He noted that while the current federal funds rate still has some restrictive effects on the economy, it is nearing a neutral level where neither economic restraint nor stimulus is applied. Therefore, any further adjustments should be made with careful consideration.

Jefferson acknowledged that the Federal Reserve's decision to lower the policy rate by 0.25 percentage points in October was appropriate, as downside risks had shifted towards the labor market in recent months. However, he refrained from indicating whether he would support another rate cut at the December policy meeting.

Despite the ongoing government shutdown which has delayed the release of official data, Jefferson mentioned that the available information suggests that the overall economic situation has not changed significantly over the past few months. The economy continues to grow at a moderate pace, while the labor market is cooling down gradually.

Jefferson also touched upon the impact of artificial intelligence (AI) on employment and prices. He pointed out that it is still too early to determine the extent of AI's influence on these areas. 'Recent changes in hiring activity, productivity growth, and inflation may reflect the transformations brought about by AI, but quantifying its effects remains challenging,' he stated.

In conclusion, Jefferson underscored the Federal Reserve's commitment to closely monitoring economic developments and using available data to guide future policy decisions.