Fed’s Jefferson supported last week’s rate cut, but wants to move slowly on further cuts

Federal Reserve Vice Chair Philip Jefferson said Friday that he supported cutting rates at the last policy meeting given greater concerns about the job market, but he wants to move more slowly going forward on future rate cuts.

“The current policy stance is still somewhat restrictive, but we have moved it closer to its neutral level that neither restricts nor stimulates the economy,” Jefferson said in a speech at the Bundesbank in Frankfurt. “Given this, it makes sense to proceed slowly as we approach the neutral rate.”

With future interest rate decisions, Jefferson said he will take a “meeting-by-meeting approach,” and said that was “especially prudent” now given that it’s unclear how much official data the Fed will have before its December meeting due to the government shutdown.

Friday would have brought the government jobs report for October, the second straight employment report release precluded by the shutdown.

Officials are having to rely on private sector data, which this week showed that jobs in the private sector sprang back last month by 42,000, as measured by payroll processor ADP. However, global outplacement firm Challenger, Gray & Christmas found layoffs hit the highest total for October in 22 years, as employers slashed over 150,000 jobs on cost-cutting and AI.

Jefferson joins a growing chorus of Fed officials who are undecided on whether to cut rates again in December. Fed Governor Lisa Cook said this week that policy is not on a predetermined path and every meeting, including December’s, is a “live meeting.”

San Francisco Fed president Mary Daly said she wants to keep an open mind about whether to cut again based on balancing the risks for higher inflation with weaker job growth.

Chicago Federal Reserve president Austan Goolsbee told Yahoo Finance in an interview Monday that the threshold for cutting rates again is higher, given that inflation is moving in the wrong direction and officials are proceeding without official economic data.

Goolsbee said he remains worried about “front-loading rate cuts,” noting that core inflation over the past three months has been running at 3.6% on an annualized basis, while core services inflation has been closer to 4% for the same period. The Fed has an inflation target of 2%.

And Cleveland Fed president Beth Hammack said Thursday she’s more concerned about inflation given that she believes it’s farther away from the Fed’s 2% target than the unemployment rate is.

Fed Chair Jerome Powell was candid during the press conference last Wednesday following the policy meeting that there was division among officials over the direction of future policy, saying that a December rate cut was “not a foregone conclusion — in fact, far from it.” He noted that with the last two rate cuts, there’s a feeling that the central bank is 150 basis points closer to neutral on its benchmark policy interest rate — a level designed to neither spur nor slow growth — than a year ago and that there’s a sentiment emerging that “maybe we should wait.”

Elsewhere Friday, New York Fed president John Williams said it could soon be time for the Fed to start buying bonds again, after announcing last week that it would freeze its balance sheet starting Dec. 1. In order to keep the balance sheet level, the Fed may need to purchase bonds.

Jennifer Schonberger covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.