A top Federal Reserve official opens door to keeping rates high for longer
WASHINGTON (AP) — Federal Reserve Vice Chair Philip Jefferson suggested Tuesday that the central bank’s key rate may have to remain at its peak for a while to bring down persistently elevated inflation.
In a speech, Jefferson said he expects inflation to continue to slow this year. But he omitted a reference to the likelihood of future rate cuts that he had included in a previous speech in February. Instead, he said his outlook is that inflation will cool even with the Fed’s key rate “held steady at its current level.”
If elevated inflation proves more persistent than he expects, Jefferson added, “it will be appropriate” to keep rates at their current level “for longer” to help slow inflation to the Fed’s 2% target level. U.S. consumer inflation, measured year over year, was most recently reported at 3.5%.
Jefferson’s remarks appeared to open the door to the prospect that the Fed will dial back its forecast, issued at its most recent policy meeting in March, that it would carry out three quarter-point cuts this year to its benchmark rate, which stands at about 5.3%. Chair Jerome Powell is scheduled to speak later Tuesday and may comment on the Fed’s potential timetable for rate cuts.