'Little progress' in slowing inflation

WASHINGTON - Federal Reserve Governor Philip Jefferson said inflation remains too high with “little progress” made toward bringing it down to the central bank's 2% target, a pessimistic assessment, given signs that price increases may be slowing. 

Jefferson, nominated by President Joe Biden to the position of Fed vice chair on May 12, also said that the turmoil and failure of three bank failures will likely have limited impact on the economy.

Jefferson's potential elevation to No. 2 on the Fed's 7-member board would give him greater influence over interest rate policy. 

While inflation has declined since last June, Jefferson said that “nearly all” of the decline stemmed from falling energy and food prices.

“The bad news is that there has been little progress on core inflation,” he said. Core prices exclude food/energy categories and are considered a better measurement of underlying inflation.

Jefferson also cited a closely watched metric that tracks the prices of services - from medical care to dining out - "has not shown much sign of slowing,” he said.

At the Fed's recent policy meeting, the central bank suggested it may pause its interest rate increases at its June meeting, after lifting it 10 times in a row. The hikes are intended to slow spending, growth and inflation. He did not hint whether he would support such a pause.

With the failure of three large banks, a reluctance of banks to lend money could slow down the economy and reduce the need for the Fed to lift its key rate.

Michelle Bowman, another Fed governor, expressed disappointment with the progress of taming inflation. “Should inflation remain high and the labor market remain tight,” more rate increases “will likely be appropriate” to lower inflation, Bowman said.

Core inflation has been stuck in a range of 0.3%-0.5% for months, Tom Barkin, president of the Federal Reserve Bank of Richmond, said recently, “where you’d really like it to be moving down and in concert with our target.” (Market Beat 05/12/23) Little progress has been made in curbing too high inflation, Fed's Jefferson says - MarketBeat