• Fed Vice Chair Philip Jefferson said the central bank may need more time before its next rate move.
  • He expects inflation to stay elevated in the near term but sees no broad spillover from tariffs or energy yet.
  • Jefferson’s comments come two weeks after the Fed raised rates to 3.75%–4.00% and suggest October hike is not automatic.

Fed’s Jefferson: ‘More Time’ Needed

Federal Reserve Vice Chair Philip Jefferson on Thursday signaled that the central bank is not rushing to follow September’s rate increase with another hike, even as he acknowledged inflation risks remain tilted to the upside. In remarks that emphasized data dependency, Jefferson said the Fed “may need more time” to assess the economic impact of a cascade of supply shocks before deciding its next policy move.

The comments come just two weeks after the Federal Open Market Committee raised the federal-funds target range by 25 basis points to 3.75%–4.00%, citing elevated inflation and the need to return price growth to the 2% objective more promptly. That decision, and policymakers’ projections, had pointed toward the possibility of another increase later this year. But Jefferson’s tone on Thursday tempered expectations for an imminent follow-up, suggesting the committee can wait for incoming data on inflation, employment, demand, and financial conditions before acting again.

Inflation Risks Skewed Upward

Jefferson was clear that his baseline outlook still involves elevated inflation in the short run. He said inflation risks are tilted to the upside, and he expects price pressures to remain high before eventually declining. The key uncertainty, he noted, is whether repeated supply shocks begin to feed into broader inflation or unanchor inflation expectations.

So far, Jefferson said he is not seeing inflation spillovers from tariffs or energy—a crucial distinction. One-off price-level increases from import duties or energy disruptions are less concerning to the Fed than broad, persistent second-round effects that show up in wages and services prices. The absence of such spillovers gives the Fed room to be patient, but Jefferson warned that the shocks cannot be considered in isolation.

“The US economy is being buffeted by a cascade of shocks,” Jefferson said, referring to higher tariffs, energy disruptions, shifting trade flows, and geopolitical tensions. Their combined effect on production costs, consumption, confidence, and inflation expectations may be larger or more persistent than any single shock alone.

Growth Holds, But Risks Loom

On the growth front, Jefferson said he expects near-term real economic growth to remain around its first-half pace, indicating the economy has not yet deteriorated enough to force a rapid shift toward easier policy. That resilience, combined with still-high inflation, supports the case for keeping rates restrictive for now.

But the Fed faces a delicate balancing act. Higher energy prices can weigh on consumer spending and business margins, while tighter credit conditions could slow hiring. Jefferson has previously noted that elevated oil prices stemming from the Middle East conflict pose upside risks to global inflation and downside risks to growth.

Market participants parsed Jefferson’s remarks as less hawkish than some had feared, with rate-sensitive assets supported by the suggestion that an October hike is not a done deal. Still, his upward inflation-risk assessment limits the case for pricing in a quick pivot toward cuts.

Political and Global Crosscurrents

Tariff policy remains a central wildcard. Import duties are government-imposed changes that can raise the domestic price of affected goods and inputs, and their pass-through to consumer prices is being closely watched. Internationally, disrupted trade flows and energy supply conditions mean US inflation is partly being shaped by events beyond the Fed’s direct control. Interest rates can restrain aggregate demand, but they cannot produce oil, reopen trade routes, or reverse tariffs.

The Fed’s next scheduled meeting is October 27–28. Between now and then, officials will scrutinize whether inflation broadens beyond tariff- and energy-sensitive categories, whether consumer spending softens under higher energy costs, and whether the labor market remains stable.

Jefferson’s central case remains that inflation will decline after a near-term period of elevation, provided that tariff effects remain largely one-off, energy-price pressures moderate, and longer-term inflation expectations stay contained. But if energy costs remain elevated, tariffs generate wider price and wage increases, or inflation expectations rise, another hike—or a longer period at restrictive rates—becomes more likely.

“We can’t consider each supply shock in isolation,” Jefferson said, underscoring the challenge of navigating a complex inflationary environment.

A Fed spokesperson did not respond to a request for additional comment.

Correction: An earlier version of this article misstated the date of the next FOMC meeting. It is October 27–28, not October 28–29.