STANFORD: Federal Reserve Vice Chair Philip Jefferson on Thursday suggested he would be open to raising interest rates if there is no near-term improvement in inflation, though for now he believes it will be enough to hold short-term borrowing costs steady as the Fed did in June.
“This policy stance should continue to support the labor market while allowing inflation to resume its decline toward our 2% target as the effects of past tariffs and energy prices pass through completely,” Jefferson said in remarks prepared for delivery at the Stanford Institute for Economic Policy Research.
“That said, in a scenario where actual inflation does not start to cool down soon, I believe that it could be appropriate to reconsider our current policy stance to ensure we fulfill our commitment to deliver price stability.” The Fed next meets to decide rates on July 28-29. After government data published this week showed consumer price inflation had cooled in June, traders have largely exited any expectation for a rate hike this month.
Even so, policymakers are wary of banking too heavily on one month of improvement after months when inflation moved in the wrong direction. A few feel a rate hike is already called for, notably Dallas Fed President Lorie Logan in remarks made earlier Thursday. That will set up a vigorous debate around the table in Washington in two weeks.
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