Charges more likely to fall over medium time period

By Howard Schneider

(Reuters) – The Federal Reserve can proceed reducing rates of interest at the least “over the medium time period,” Fed Vice Chair Philip Jefferson mentioned on Tuesday, reiterating the U.S. central financial institution’s message that policymakers needn’t rush their subsequent charge lower.

“General, the U.S. financial system is beginning the 12 months in place. I count on inflation’s gradual descent to proceed, and I anticipate that financial development and labor market situations will stay strong,” Jefferson mentioned in remarks ready for supply at Lafayette School in Easton, Pennsylvania.

In that state of affairs, “over the medium time period, I proceed to see a gradual discount within the stage of financial coverage restraint positioned on the financial system as we transfer towards a extra impartial stance because the probably consequence,” Jefferson mentioned. “That mentioned, I don’t suppose we have to be in a rush to vary our stance.”

“So long as the financial system and labor market stay robust, I see it as applicable…to be cautious in making additional changes,” he mentioned.

The outlook for this 12 months is nice, he mentioned, however “we face extra uncertainties concerning the precise form of presidency insurance policies, in addition to their financial implications.”

The Fed at its coverage assembly final week held its benchmark rate of interest regular within the 4.25% to 4.5% vary. Inflation stays greater than half a proportion level above the Fed’s 2% goal and has proven little enchancment during the last half 12 months.

Whereas Fed policymakers are assured worth pressures proceed to ease within the financial system, they’re additionally watching intently to know the web impression of the Trump administration’s tariff, immigration, tax and different insurance policies.

Buyers at present count on the Fed to chop the coverage charge by 1 / 4 of a proportion level in June and once more in December.

(Reporting by Howard Schneider; Modifying by Leslie Adler)