Key facts
- Jefferson said he sees the trajectory of inflation as the more important signal for the appropriate policy stance.
- Jefferson joined the 10-2 majority at the October meeting that voted to wait for more data before considering a rate hike.
- Jefferson gave no guidance on the size or pace of further rate increases, unlike other Fed policymakers.
- Jefferson said AI could displace workers faster than they can retrain, potentially raising unemployment.
- Jefferson said AI adoption could raise overall borrowing costs if companies must keep increasing investment.
Federal Reserve Vice Chair Philip Jefferson said on November 13 that he is taking his policy cues from inflation, with the economy growing and the labor market stabilized. The remark, in remarks prepared for delivery at the University of California, San Diego, suggests he may support further interest-rate hikes to bring inflation under control, Reuters reported.
Jefferson joined the 10-2 majority of Fed policymakers who voted at their October meeting to wait for more data before considering a rate hike. "Data received since that meeting have been consistent with economic activity and labor market conditions remaining broadly solid, while inflation readings show persistent price pressures," he said.
"Accordingly, I see the trajectory of inflation as providing the more important signal for determining the appropriate stance of monetary policy," Jefferson said. Other Fed policymakers in recent weeks have said elevated and persistent inflation means they would likely support rate hikes bigger or quicker than the single quarter-point increase the Fed delivered in September. Jefferson gave no such guidance.
"Going forward, I believe that further policy adjustments should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks," he said.
Jefferson was more forthcoming on artificial intelligence, which he forecast would raise productivity substantially but gradually, bolstering output and income while potentially causing pain for some workers and businesses. "One risk to my baseline outlook is that the new technology could displace workers much faster than they can adapt and retrain, which could result in an increase in unemployment," he said.
He said monetary policy can affect cyclical conditions such as a temporary downturn in employment and spending, but cannot address the structural factors that determine long-run employment rates. AI adoption could also raise overall borrowing costs if companies find they must continually increase investment to keep up with a permanently higher pace of productivity growth, he said.