Federal Reserve Vice Chair Philip Jefferson said Friday he sees the central bank’s benchmark interest rate as “broadly in the range of neutral” and will closely examine the data when considering any additional rate cuts.
“The current policy stance is well positioned to address the risks to both sides of our dual mandate,” Jefferson said in a speech at the Brookings Institution in Washington, D.C. “Our policy stance should help stabilize the labor market while allowing inflation to resume its decline toward our 2% target.”
Jefferson raised his economic outlook for the year based on signs of resilience and said he expects GDP to grow at 2.2%, similar to the growth rate in 2025.
He said there are signs the job market is stabilizing, and while downside risks to employment remain, he expects the unemployment rate will hold approximately steady throughout the year. The unemployment rate currently stands at 4.4%.
Jefferson called the labor market “roughly in balance” with a low-hire, low-fire environment continuing.
Jefferson noted that inflation’s downturn has stalled over the past year on account of tariffs. He estimates inflation on a “core” basis, which excludes volatile food and energy prices, ended the year at 3% based on the Personal Consumption Expenditures index — similar to the end of 2024. But he said while there’s a risk inflation could rise, he expects price increases to resume their decline once tariffs have worked their way through, especially since the price of services has dropped. He also said an increase in productivity growth could push down inflation.
“I am cautiously optimistic about the economic outlook,” Jefferson said. “I see signs the job market is stabilizing, that inflation can return to a path toward our 2% objective, and that sustainable economic growth will continue.”
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Federal Reserve Vice Chair Philip Jefferson testifies before a Senate Banking, Housing, and Urban Affairs Committee confirmation hearing on Feb. 3, 2022. (Ken Cedeno/Pool/AFP via Getty Images) · KEN CEDENO via Getty Images
Elsewhere, San Francisco Fed president Mary Daly wrote in a LinkedIn post on Friday that she still has concerns about the strength of the job market. Daly said she sees a disconnect between businesses and workers, noting that while businesses are cautiously optimistic, the workers she speaks to are concerned about the health of the job market.
Daly noted the low-hire, low-fire environment could persist, but added that “workers are aware that things could change quickly, leaving them in a no-hiring, more-firing labor market.”
“With inflation printing above the FOMC’s 2% goal, this rightly feels precarious,” she said.