San Diego (California) [US], November 14 : US Federal Reserve Vice Chair Philip N Jefferson has said that inflation will be the key factor in determining future interest rate decisions, as price pressures remain elevated despite signs of stability in the American economy and labour market.
Speaking at the University of California, San Diego Economic Roundtable on Friday, Jefferson said, "Accordingly, I see the trajectory of inflation as providing the more important signal for determining the appropriate stance of monetary policy."
He added, "Going forward, I believe that further policy adjustments should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks."
Jefferson's remarks come as US inflation continues to remain well above the Federal Reserve's 2 per cent target.
According to the data cited in his speech, the annual personal consumption expenditures (PCE) inflation rate stood at 3.6 per cent in September, while core PCE inflation, which excludes food and energy prices, was 3.1 per cent.
Expressing concern over persistent price pressures, Jefferson said, "I remain concerned about the risk of higher energy prices leading to a persistent rise in inflation more broadly."
He noted that higher energy costs were affecting sectors such as airfares and transportation, while strong demand for new technologies was also pushing up prices of certain goods, including memory chips.
Jefferson said inflation data received so far for October remained consistent with price pressures staying well above the Fed's target.
On the labour market, he said conditions had stabilised, with the unemployment rate standing at 4.1 per cent in October.
"I expect the unemployment rate to stay around its current level in the near term—a level I view as consistent with maximum employment," he said.
Jefferson also noted that the US economy had gained momentum this year, with gross domestic product (GDP) expanding at an annualised rate of 3.4 per cent in the third quarter.
"The economy has gained momentum this year, expanding at a pace roughly in line with its potential," he said.
Referring to the Federal Open Market Committee's (FOMC) October meeting, Jefferson said he had joined the majority of policymakers in voting to keep interest rates unchanged.
He said economic activity and labour market conditions had remained broadly solid since that meeting, while inflation readings continued to show persistent price pressures.
His remarks suggest that the Fed's future policy decisions will remain closely tied to inflation trends, even as economic growth and employment conditions remain relatively stable.