Philip N. Jefferson
Vice Chair, Federal Reserve
Analysis
Vice Chair Jefferson's stance reflects a carefully calibrated balance between competing concerns: while acknowledging strong economic growth and stabilizing labor market conditions that might warrant tightening, he simultaneously emphasizes that inflation progress has stalled and remains elevated, requiring patience before policy adjustment. His distinction between transitory tariff effects and underlying price pressures—coupled with his assertion that "anchored inflation expectations should limit second-round effects"—suggests confidence that current conditions do not demand immediate action in either direction, positioning the Fed to maintain its existing posture pending further data clarity on both employment and price stability objectives.
Key Passages
"For example, although I see higher tariffs as having boosted inflation somewhat in 2025, I continue to see it as a reasonable base case that the effect on inflation will not be long-lasting and will amount to a one-time shift in the price level, in part because anchored inflation expectations should limit second-round effects of tariffs on prices and wages."
"Progress on disinflation has stalled over the past year, and inflation remains elevated relative to our 2 percent target."
"The stall in the disinflationary process is mainly because of tariffs on some goods."
"Supply-Side (Dis)Inflation Dynamics Now that I have shared my near-term outlook for the economy and monetary policy, I will turn to the topic of supply-side influences on inflation–the subject of this conference."
"Models of inflation dynamics built on standard Phillips curve relationships, however, were unable to explain fully the magnitude of the surge in inflation."