This headline is weighing on rates. US 2-year yields are down 13.5 bps now in a big reversal from earlier.
- Worried high inflation could spill into expectations
- Sees jobless rate holding steady into end of this year
- Still expects inflation pressure to ease over longer term
- Inflation remains above target with upside risks
- September rate hike will help anchor inflation expectations
- Bond yields show market participants rethinking outlook
- Economic output and job market are broadly solid
- Weighing more data will allow Fed to make better call on rates
- US central bank ‘may take more time’ to decide next rate move
- Future Fed rate changes should be driven by the data
- Fed is fully committed to returning inflation to 2% target
Fed Vice Chair Philip Jefferson says the central bank may take more time to decide on its next rate move, echoing the patient tone from New York Fed President John Williams earlier this week. The Williams comment crushed Oct rate hike expectations and this will add to that theme.
Jefferson said weighing more data will allow the Fed to make a better call on rates and that future changes should be driven by the data.
He described economic output and the job market as broadly solid and sees the unemployment rate holding steady through the end of the year.
On inflation, he said it remains above target with upside risks and that he’s worried high inflation could spill into expectations. He said the September rate hike will help anchor those expectations and that he still expects inflation pressure to ease over the longer term. He reiterated that the Fed is fully committed to returning inflation to 2%.
He also noted that bond yields show market participants are rethinking the outlook.
The problem with ‘taking more time’ is that eventually you fall behind the curve but it sounds like that’s the calculus at the moment.
This article was written by Adam Button at investinglive.com.