Fed Vice Chair Jefferson says interest rates could stay higher for longer if inflation persists

By Jeffry Bartash

Federal Reserve efforts to reduce inflation hit wall

Federal Reserve Vice Chairman Philip Jefferson said U.S. interest rates might have to stay higher for longer if "inflation is more persistent than I currently expect it to be."

Jefferson pointed to a sharp increase in consumer prices and an acceleration in hiring as evidence the U.S. economy is still running hot despite high interest rates.

"Recent readings on both job gains and inflation have come in higher than expected," he noted in remarks Tuesday at a conference in Washington, D.C.

Jefferson said he expects inflation will decline further, but he added that the "outlook is still quite uncertain."

His speech's title: "Economic Uncertainty and the Evolution of Monetary Policy Making."

A raft of senior Fed officials in the past few weeks have said they are unsure when the will cut interest rates or by how much after the inflation readings in the first quarter showed prices rising faster vs. the end of 2023.

Wall Street DJIA SPX had expected the first Fed rate cut to come in June, with a total of three in 2024. Now many analysts think the first reduction could come later. And the Fed could also just cut rates once or twice.

The Fed is aiming to lower the yearly rate of inflation to 2%, but prices are rising about 2.5% to 3.5% depending on the index. From 2022 to 2023, the Fed rapidly raised interest rates to try to tame the worst inflation in 40 years.

-Jeffry Bartash

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04-16-24 0904ET

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