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Fed Vice Chair Jefferson warns inflation risks are still tilted higher

Jefferson said headline PCE inflation was 3.4% in August and expects unemployment to stay near maximum employment at 4.1%.

Reported · Written up by our desk · Central Banks

Federal Reserve Vice Chair Philip Jefferson said on Oct. 1 that he sees the US economy remaining resilient, but warned that inflation risks are still tilted to the upside as higher energy prices, AI driven investment demand, and trade policy changes reshape the outlook, according to Action Forex.

Jefferson, speaking at the Darden School of Business at the University of Virginia, said inflation has been too high for too long, and pointed to headline PCE inflation at 3.4% in August. He said he is particularly concerned that higher energy prices could contribute to a more persistent rise in inflation more broadly.

He also cited unusually strong AI related demand as adding to higher production costs for some goods and services. At the same time, Jefferson described economic activity and labor conditions as broadly solid.

Looking ahead, Jefferson said near term GDP growth should remain around the 2.4% pace recorded in the first half of the year, supported by AI related investment, and that unemployment at 4.1% is near maximum employment. He said his base case is for inflation to stay elevated in the short run before resuming its decline toward 2%, while viewing risks to his inflation forecast as tilted upward.

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