The Federal Reserve Governor Philip Jefferson stated on Friday that wage growth in the United States is running too high to be consistent with a timely and sustainable return to the Federal Reserve’s 2% inflation objective. He further added that the Fed is addressing inflation promptly and forcefully to maintain its credibility and preserve the inflation anchor.
The Governor also noted that the outlook for non-housing core services inflation depends on whether labor demand moves into better balance with labor supply. He further highlighted that the ongoing imbalance between supply and demand for labor suggests that high inflation may come down only slowly.
Jefferson also stated that the Fed’s credibility is higher now than in the 1960s and 1970s. He added that the argument that policymakers should accept that disinflation will be costly is well-reasoned. He pointed out that the current situation is different from past inflation fights and that policymakers must complement findings from economic models with careful scrutiny of real-time data.
In terms of market reaction, the US Dollar Index showed no immediate response to these comments and was last seen rising 0.6% on the day at 105.19.
Overall, the Federal Reserve Governor Philip Jefferson’s comments on Friday highlighted the need for the Fed to address inflation promptly and forcefully to maintain its credibility and preserve the inflation anchor. He further noted that the current situation is different from past inflation fights and that policymakers must complement findings from economic models with careful scrutiny of real-time data. The US Dollar Index showed no immediate response to these comments.
The Federal Reserve’s inflation objective is to maintain a rate of 2%. However, wage growth in the United States is running too high to be consistent with a timely and sustainable return to the Federal Reserve’s 2% inflation objective. This is a major concern for the Federal Reserve as it means that inflation could remain high for an extended period of time.
The Governor also noted that the outlook for non-housing core services inflation depends on whether labor demand moves into better balance with labor supply. He further highlighted that the ongoing imbalance between supply and demand for labor suggests that high inflation may come down only slowly. This is a major issue as it means that inflation could remain high for an extended period of time.
The Governor also stated that the Fed’s credibility is higher now than in the 1960s and 1970s. He added that the argument that policymakers should accept that disinflation will be costly is well-reasoned. This is an important point as it suggests that the Fed should be proactive in addressing inflation rather than waiting for it to naturally come down.
In terms of market reaction, the US Dollar Index showed no immediate response to these comments and was last seen rising 0.6% on the day at 105.19. This suggests that investors are not overly concerned about the Fed’s inflation objectives and the potential for high inflation to remain for an extended period of time.
Overall, the comments from Federal Reserve Governor Philip Jefferson on Friday highlighted the need for the Fed to address inflation promptly and forcefully to maintain its credibility and preserve the inflation anchor. He further noted that the current situation is different from past inflation fights and that policymakers must complement findings from economic models with careful scrutiny of real-time data. The US Dollar Index showed no immediate response to these comments, suggesting that investors are not overly concerned about the Fed’s inflation objectives and the potential for high inflation to remain for an extended period of time.
