One of the governors of the American central bank, and vice-president designate, Philip Jefferson, was more optimistic than other officials of the institution on Friday about the path of inflation, saying that the Fed is ” on the right track “.
“I believe we are well on the right track “, underlined Philip Jefferson, during a speech at the Hoover Institution of Stanford (California).
“Is inflation still too high? Yes. Has the current disinflation been uneven and slower than any of us would like? Yes,” he conceded.
However, the Fed is doing “what is needed or expected,” he said. “Furthermore, monetary policy affects the economy and inflation with long and varied lags, and the full effects of our rapid tightening are still likely ahead of us.”
These remarks contrast with those of other officials of the institution, who this week did not rule out a further rise in rates, even though a pause in these increases is widely expected by the markets.
Inflation fell slightly in April in the United States, to 4.9% over one year against 5.0% in March, according to the CPI index published on Wednesday. Over one month, however, it rebounded to 0.4% against 0.1% in March.
The Fed favors another measure of inflation, the PCE index, published at the end of the month, and which it wants to reduce to 2%. It was 4.2% in March over one year.
“The good news is that food and energy prices fell in March (…), the bad news is that there was little progress on core inflation”, c that is to say for the other categories, commented Philip Jefferson again.
He further underlined “that there is significant uncertainty about the extent of the tightening of credit conditions over the coming year in response to the banking crisis and the magnitude of the effect that this tightening could have on the American economy”, acknowledging “a risk” that the effect “will be greater than expected”.
The Fed has, since March 2022, raised its main key rate by 5 points, from 0 to 0.25%, to 5.00-5.25%. The next meeting will be June 13-14.
Philip Jefferson, who joined the Fed’s board of governors in May 2022, was chosen on Friday by Joe Biden to become the institution’s vice chairman, an appointment that the Senate must confirm.