MNI: Fed Still Gauging Effects Of Tightening, Jefferson Says

The Federal Reserve is still figuring out how much of the inflation slowdown can be attributed to the central bank's sharp interest-rate hikes, Board Governor Philip Jefferson said Monday.

“Some of the disinflation, or reduction in the inflation rate, is due to monetary policy tightening, and some of this disinflation is due to other factors, such as supply chain bottlenecks easing and falling energy prices,” Jefferson said in prepared remarks to Washington and Lee University that largely avoided direct discussion of the current policy and economic outlook.

“Chair Powell and other colleagues in the Federal Reserve System have pointed out that monetary policy affects the economy and inflation with long, variable, and highly uncertain lags, and we are still learning about the full effect of our tightening thus far.”

Expectations of further rate hikes have been curtailed sharply since trouble at some U.S. regional banks this month set off fears of broader instability. The Fed last week raised rates another 25 basis points to a 4.75% to 5% range but indicated future moves were conditional on officials' assessment of the possible credit tightening effects of the banking turmoil. (See MNI INTERVIEW: Credit Crunch Looms On Bank Runs-Ex-Fed’s Stein)