① The Vice Chairman of the Federal Reserve, Jefferson, stated that tariffs and uncertainty could slow down economic growth in the USA and increase inflation, but monetary policy is ready to respond; ② Jefferson downgraded his expectations for economic growth in the USA this year but predicts that the economy will continue to expand. He noted that tariffs could disrupt the progress of inflation reduction and will likely increase inflation at least in the short term.
On May 15, the Financial Association reported (Editor Zhao Hao) that the Vice Chairman of the Federal Reserve, Philip Jefferson, recently stated that tariffs and related uncertainties could slow down economic growth in the USA and increase inflation this year. However, he noted that monetary policy is ready to respond when necessary.
On Wednesday, May 14, local time, Jefferson stated at a meeting organized by the New York Fed that with the increased uncertainty regarding government policies, it is currently unclear whether the impact of tariffs on rising prices is short-term or more enduring.
Jefferson downgraded his expectations for economic growth in the USA this year, but he still expects the economy to continue to expand, stating, "If the currently announced tariff measures continue, they may disrupt the progress of inflation reduction and will likely increase inflation at least in the short term."
Jefferson said: "Given the greater risks to our dual mandate - maximum employment and controlling inflation - I believe the current stance of monetary policy is well-positioned to respond appropriately to potential economic changes."
Last week, the Federal Open Market Committee (FOMC) unanimously supported keeping the target range for the federal funds rate unchanged between 4.25% and 4.50%, and indicated that the USA faces increased risks of rising unemployment and inflation.
The central bank policymakers are not in a hurry to lower borrowing costs before reaching a clearer conclusion about the tariff policy implemented by Trump. Jefferson indicated that the overall impact of changes in trade and immigration policies may remain unclear for "some time."
Earlier this week, high-level economic and trade talks between China and the USA reached important consensus and made substantive progress, directly reflected in a significant reduction in bilateral tariff levels. The international community highly praised this, and financial markets responded positively.
Economists believe that this change reduces the likelihood of a full-blown economic recession in the USA later this year, but it is still not enough to prevent an economic slowdown.
On Tuesday, data released by the USA Bureau of Labor Statistics showed that the CPI rose 2.3% year-on-year in April, while the core Indicators rose 2.8% year-on-year, both being the lowest since early 2021.
Jefferson pointed out that recent inflation data has made progress towards the Federal Reserve's 2% target, but he warned, "This target has not yet been achieved." He stated that the current interest rate level is at a "moderately restrictive" level.
"I have lowered my economic growth expectations for this year, but I believe the USA economy will continue to expand," Jefferson said, "Of course, trade policies are still changing, and their ultimate economic impact is yet to be known, I will closely monitor the relevant developments."
Editor/danial
