Fed's Jefferson says central bank 'may take more time' before hiking rates again

Federal Reserve Vice Chair Philip Jefferson said Thursday the central bank will wait to evaluate incoming economic data before deciding whether to hike interest rates again.

“As we look ahead, my view is that any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks,” Jefferson said at the University of Virginia’s Darden School of Business. 

The Fed governor later said, “My colleagues and I will need to come to our own judgment, which may take more time.”

Annual inflation, as measured by the personal consumption expenditures (PCE) price index, was 3.4 percent in August, according to Bureau of Economic Analysis data released Wednesday.

Core prices, which does not include more volatile food and energy prices, were up 3 percent year-over-year, per the PCE. 

Since the Federal Open Market Committee (FOMC) voted unanimously in mid-September to hike interest rates by a quarter point to fight inflation, multiple panel officials have signaled future rate increases are on the horizon. 

Anna Paulson, the president of the Federal Reserve Bank of Philadelphia, said last week that the Fed may need to do “some modest further tightening” of monetary policy to get inflation back down to its 2 percent target rate.

“In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,” Michael Barr, a member of the Fed’s Board of Governors, said Tuesday at the Detroit Economic Club.

But officials have noted they will continue to track economic data prior to making a decision. Before the FOMC’s next meeting on Oct. 27-28, the Bureau of Labor Statistics is set to release data for the consumer price index, another gauge of inflation.

Federal Reserve Bank of New York President John Williams said during a Tuesday event at the University of Buffalo that the “accumulation of more data” will help the committee decide on the “appropriate setting of monetary policy.”

Williams added, “If the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target.”

The caution from multiple FOMC officials has flipped a switch for traders, who are pricing in a roughly 76 percent chance of the panel holding rates at their range of 3.75 percent to 4 percent at the end of this month, according to the CME FedWatch tool. 

A week ago, traders were pricing in about a 69 percent probability of the FOMC hiking rates by a quarter point.