MNI BRIEF: Restrictive Fed To Weigh On Demand - Jefferson

Federal Reserve Vice Chair Philip Jefferson said Monday current U.S. monetary policy is restrictive and will continue to weigh on demand, particularly on interest-sensitive spending.

"I believe that our policy rate is in restrictive territory as we continue to see the labor market come into better balance, and inflation decline although nowhere near as quickly as I would have liked," said Jefferson in prepared remarks to the Mortgage Bankers Association. Inflation remains above the FOMC's 2% inflation objective and "it is too early to tell whether the recent slowdown in the disinflationary process will be long lasting." (See: MNI INTERVIEW: CPI Keeps Fed On Track For '24 Cuts-Ireland)

The housing sector is also a key part of the transmission mechanism of monetary policy. Jefferson said the large increase in market rents during the pandemic is still being passed through to existing rents and may keep housing services inflation elevated for a while longer.