Jefferson: Economy grows, inflation persists above 2 percent
Federal Reserve Vice Chair Philip N. Jefferson presented his economic outlook, focusing on the labor market and inflation. He noted continued economic growth, a balanced labor market, and inflation remaining above the Fed's 2 percent target.
Growth continues, inflation stalls
Federal Reserve Vice Chair Philip N. Jefferson presented an economic outlook showing continued growth, driven by resilient consumer spending and healthy business investment.
He projects the economy to expand at a similar or slightly faster rate than last year, supported by high-tech capital investment, particularly in artificial intelligence infrastructure.
However, significant headwinds, such as the Middle East conflict and elevated energy prices, introduce considerable uncertainty.
Jefferson noted that inflation has remained above the Fed's 2 percent target for five years.
The PCE price index rose 2.8 percent for the 12 months ending in February, with core prices (excluding food and energy) rising 3.0 percent.
Progress in lowering core inflation has stalled over the past year, mainly due to tariffs and expected elevated energy prices.
Labor market finds its footing
Jefferson noted the labor market cooled in 2025, with unemployment rising from 4.0 percent to 4.5 percent by November due to slower labor force growth and firms' hiring reluctance.
Recent months show stabilization, with the unemployment rate at 4.3 percent in March.
Employers added 178,000 jobs in March, averaging 70,000 per month in Q1. This 'low-hire, low-fire' state reflects cautious hiring rather than widespread layoffs.
Job openings have stopped declining, and the ratio of openings to unemployed persons is flattening, suggesting a potential balance in labor supply and demand.
Policy poised for uncertainty
Jefferson's assessment reveals a challenging outlook, balancing downside risks to the labor market with persistent upside risks to inflation.
The current policy stance, having seen 175 basis points of cuts to a neutral range, is considered well-positioned for various outcomes.
This delicate balance implies future policy adjustments will remain strictly data-dependent, reflecting ongoing economic uncertainties.