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Fed's Jefferson says inflation is Fed's biggest worry

Howard Schneider

ATLANTA (Reuters) – Federal Reserve Governor Philip Jefferson said in his remarks on Tuesday that inflation is the most serious problem facing the Fed and that it “may take some time” solve. First public speech since joining the U.S. central bank governing body.

“It may take some time to restore price stability, and it may be a period of time below trend growth,” Jefferson said at a conference in Atlanta, where the Fed’s consensus on continuing rate hikes to address price pressures .

“I want to assure you that my colleagues and I are determined to bring inflation down to 2%… We are committed to taking the further steps necessary.”

Jefferson, an economist and former university administrator, was appointed to the Federal Reserve Board by President Joe Biden and confirmed by the Senate in May. He and two other new governors joined the Fed in one of the quickest shifts in U.S. monetary policy in decades, with policymakers raising the benchmark overnight interest rate to its current level of 3 from near-zero levels at the start of the year. 25%-3.25%. By early next year, the ratio is expected to reach 4.6%.

Jefferson did not comment at the Nov. 1-2 policy meeting on the direct question of whether the central bank will provide 75 basis points for the fourth time in a row as investors currently As expected, a rate hike or 0.5 percentage point increase.

But he did link the Fed’s inflation target to its other mandate of maximum employment, saying other policymakers have already done so and set the stage for better employment outcomes.

Inflation-stabilizing monetary policy “can produce a long-term, non-inflationary expansion of the economy . . . Economic history suggests that this is the ideal framework or environment for inclusive growth,” Jefferson said. “So it’s important that we get back to that economy. That’s what I think the Fed intends.”

Fed Chairman Jerome Powell acknowledged the central bank’s intention to slow economic growth It will cause economic “pain” and potentially increase unemployment, but the worse result will be inflation.

Jefferson said in his speech that there is reason to believe that the labor market has eased. In fact, new data on Tuesday showed job openings fell sharply in August, starting to bring the number of workers sought by companies more in line with job losses.

Jefferson said this could help slow wage growth, and signs that “supply bottlenecks are finally starting to resolve” could also help slow price increases pace of.

But still not sure how that will play out, and at the same time, “inflation remains high, which is my biggest concern,” Jefferson said. “Inflation has placed a financial burden on households and businesses, and everyone has felt its effects.”

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