Cautiously optimistic about inflation progress, likely due for a rate cut later this year

Federal Reserve (Fed) Vice Chair of the Board of Governors Phillip Jefferson spoke at the Peterson Institute for International Economics in Washington, DC Thursday.

Key highlights

Labor imbalance between demand and supply has narrowed.

Continuing strength in spending is an upside risk to forecasts.

Fed needs to remain vigilant, nimble.

Fed shouldn’t be taken by surprise by any unexpected shocks.

Fed’s Jefferson remains cautiously optimistic about progress on inflation.

According to Fed staff estimates, Personal Consumption Expenditure (PCE) Price Index rose 2.4% over the 12 months ended in January.

Fed’s Jefferson expects services inflation to moderate as labor market cools.

It will likely be appropriate to begin cutting policy rates later this year.

The Fed wants to move in a way that would not lead to stops and starts in policy, doesn’t want to increase policy uncertainty.

Fed’s Jefferson: will be looking at the totality of data when weighing rate cut options, not a single indicator.