Nodding to rising bond yields, Fed's Jefferson says can "proceed carefully"
By Howard Schneider and Ann Saphir
DALLAS (Reuters) — The U.S. Federal Reserve can «proceed carefully» in deciding whether any further increases are warranted in its benchmark policy rate of interest, Fed Vice Chair Philip Jefferson said on Monday, nodding to the recent rise in long-term U.S. bond yields as one of the factors that have left the U.S. central bank at a «sensitive» juncture in its management of monetary policy.
«We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive,» Jefferson said in his most substantive remarks since winning U.S. Senate approval as the Fed's second ranking leader behind Chair Jerome Powell.
The Fed «is in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary» to slow inflation to its 2% target, Jefferson said in an address at the National Association for Business Economics convention, highlighting the influence that higher market interest rates and the delayed effect of monetary policy on things like corporate bond refinancing will play in deciding «whether» another rate increase is needed.
While inflation remains too high, with factors including a still-strong economy and job market and possible spikes in energy costs that could push it higher again, Jefferson said that risk management was «a good reason for holding the policy rate constant at our most recent (Federal Open Market Committee) meeting.»
The Fed held rates constant at a range of from 5.25% to 5.5% at its September meeting, though a majority of policymakers at the time felt one more rate increase would be needed by the end of the year.
Since then, however, the
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