Fed Philip Jefferson stated yesterday that the current inflation rate is too high, emphasizing the FOMC’s goal to reduce it to 2% as quickly as possible. Speaking at Washington and Lee University in Lexington, Virginia, he acknowledged that the process may take some time due to persistent inflation components such as services excluding housing.
Jefferson said, “I would like to say that inflation will return to 2% soon, but we have to do it in a way that does not damage the economy any more than is necessary. That’s what we are trying to do.” Fed is grappling with the challenge of ensuring price stability amid high inflation while also maintaining financial stability in the wake of the second-largest bank failure in US history.
In his speech, Jefferson also noted that although inflation has begun to decline, it remains unclear whether this decrease is due to higher interest rates, easing pandemic-induced supply strains, or falling energy prices.
He highlighted the uncertainty surrounding the full impact of the Fed’s tightening measures, saying, “Monetary policy affects the economy and inflation with long, variable, and highly uncertain lags, and we are still learning about the full effect of our tightening thus far.”
