MNI: Fed Can Take Time On Next Rate Cut - Jefferson
MNI (WASHINGTON) - The Federal Reserve can allow monetary policy to stay restrictive for now in the face of sturdy growth, employment and elevated inflation, Fed Vice Chair Philip Jefferson said Wednesday, noting that higher household wealth is fueling robust consumer spending.
"With a strong economy and a solid labor market, we can take our time to assess the incoming data to make any further adjustments to our policy rate," he said in remarks prepared for a Vassar College lecture.
Progress toward 2% inflation has been slow in the past year, and Jefferson expects the path of inflation to continue to be bumpy, he said.
"While a cumulative cut in the policy rate by 100 basis points last year has brought the stance of monetary policy closer to a neutral setting, monetary policy continues to be restrictive," he said. (See: MNI: Fed In Holding Pattern As Inflation To Stay High-Ex-Staff)
ELEVATED WEALTH
Household wealth near its highest level in 30 years helps explain the recent higher-than-usual spending, which grew 3.2% over the past year, Jefferson said. Americans currently possess a very high level of wealth boosted by house values, relatively low overall debt levels and a strong stock market, Jefferson said.
Mortgage debt levels remain relatively subdued and both credit card balances and debt service ratios are still 1 percentage point below pre-Covid values, he noted. As the Fed lowered rates last year, auto loan and credit card rates have fallen in recent months, he said.
Low- and middle-income households and those with lower credit scores may be stretched, however, and have less of a liquidity buffer than before Covid, he said.