Jefferson: More data needed for better Fed rate decision

The statements are exerting downward pressure on rates. The US 2-year yield has dropped 13.5 basis points, a sharp reversal from earlier trading.

• He expressed concern that elevated inflation could become embedded in expectations.
• He expects the unemployment rate to remain unchanged through year-end.
• He still sees inflation pressures easing over the long term.
• Inflation remains above target with upside risks.
• The September rate increase will help anchor inflation expectations.
• Bond yields indicate that market participants are reassessing their outlook.
• Economic output and the labor market are generally solid.
• Evaluating additional data will allow the Fed to make a better rate decision.
• The US central bank 'may take more time' to decide the next rate move.
• Future Fed rate changes should be driven by data.
• The Fed is fully committed to returning inflation to its 2% target.

Fed Vice Chair Philip Jefferson said the central bank might need extra time before deciding on its next rate move, echoing the cautious stance of New York Fed President John Williams earlier in the week. Williams's comments had previously dampened expectations for an October rate hike, and Jefferson's remarks reinforce that narrative.

Jefferson stated that weighing more data would allow the Fed to make a more informed call on rates and that future adjustments should be data-driven.

He described economic output and the job market as broadly robust and sees the unemployment rate holding steady until the end of the year.

On inflation, he said it continues to exceed the target with upside risks and that he is worried high inflation could spill into expectations. The September rate hike, he argued, will help anchor those expectations, and he still expects inflation pressures to ease over the longer term. He reiterated the Fed's full commitment to bringing inflation back to 2%.

He also noted that bond yields show market participants are rethinking the economic outlook.

The drawback of a 'taking more time' approach is that it risks falling behind the curve, but that appears to be the current calculus.