Philip N. Jefferson, a member of the Board of Governors of the Federal Reserve System and a voting member of the Federal Open Market Committee (FOMC) in 2026 through his permanent Board of Governors seat, signaled the Fed may take more time to decide its next rate move. He stressed that future rate changes should follow the data, and that weighing more of it will let the Fed make better calls. He backed September's rate hike, saying it will help anchor inflation expectations.

On inflation, Jefferson said it remains above target with upside risks, and he worries that high inflation could spill into expectations. He said the Fed is firmly committed to returning inflation to 2% on time.

The labor market gives the Fed room to stay focused on prices. The economy sits quite close to maximum employment, he said, with output and the job market broadly solid and the jobless rate holding steady into year-end. That leaves the Fed more space to focus on its inflation mandate right now, though he noted there is great wisdom in the dual mandate.

On AI, he sees promise and uncertainty. It's possible AI will power big productivity gains down the road, he said, but it is hard to say what AI has done to natural rate estimates so far, and he encouraged its responsible development.

Rounding out his remarks, he pointed to blind spots in financial markets: bond yields show market participants rethinking their outlook, and the Fed does not have great insight into private credit developments.

Key Quotes:

Monetary Policy

  • US central bank 'may take more time' to decide next rate move.

  • Future Fed rate changes should be driven by the data.

  • Weighing more data will allow the Fed to make better calls on rates.

  • September rate hike will help anchor inflation expectations.

Inflation

  • Inflation remains above target with upside risks.

  • I'm worried high inflation could spill into expectations.

  • Fed is firmly committed to returning inflation to 2% on time.

  • I still expect inflation pressure to ease over the longer term.

  • Longer-term inflation expectations show the Fed is credible on getting inflation down.

  • The Fed has to be prepared to do the needed work to validate inflation expectations.

Growth & Labor Market

  • The economy is quite close to maximum employment.

  • See the jobless rate holding steady into the end of this year.

  • Economic output and the job market are broadly solid.

Dual Mandate

  • Fed has more space to focus on the inflation mandate right now.

  • There is great wisdom in the Fed's dual mandate.

AI & Productivity

  • It's possible AI will power big productivity gains down the road.

  • It is hard to say what AI has done to natural rate estimates so far.

  • I encourage the responsible development of AI.

Financial Conditions

  • Bond yields show market participants rethinking outlook.

  • The Fed does not have great insight into private credit developments.