MNI BRIEF: Fed To Move Slowly As Rate Nears Neutral-Jefferson

Federal Reserve Vice Chair Philip Jefferson on Monday advised caution in adjusting rates as monetary policy nears neutral.  

"The current policy stance is still somewhat restrictive, but we have moved it closer to its neutral level that neither restricts nor stimulates the economy. The evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate." (See MNI INTERVIEW: High Bar For More Fed Cuts As Neutral Nears-Kaplan) 

The labor market continues to see a gradual cooling in both demand and supply, while inflation is little changed from a year ago at 3%, he noted. "Some firms have indicated that they expect pass-through of pricing pressure from tariffs to pick up in the fourth quarter as the inventory of non-tariffed merchandise is depleted," he said. Still, a reasonable base case is that tariffs result in a one-time shift in the price level, not an ongoing inflation problem, he said. (See MNI INTERVIEW: Tariff Price Boost Still Percolating-Schoenle)