Fed Vice Chair: Inflation Is the Main Guide for Monetary Policy
Federal Reserve Vice Chair Philip Jefferson said inflation is his main guide for monetary policy as the U.S. economy continues to grow and the labor market stabilizes. He gave no specific guidance on the size or pace of future rate increases and warned that AI could affect employment and borrowing costs.
Federal Reserve Vice Chair Philip Jefferson said he views inflation trends as the main guide for monetary policy as the U.S. economy continues to grow and the labor market stabilizes. He gave no specific guidance on the size or pace of the next interest rate adjustments, saying policymakers still need to carefully assess data trends, changes in the economic outlook and the balance of risks.
At the Federal Reserve’s October 2026 meeting, Jefferson was among the majority who supported waiting for more data before considering a rate increase; the decision passed by a vote of 10 to 2. In recent weeks, some other Fed policymakers have said that if high inflation persists, they may support larger or more frequent rate increases than the 0.25 percentage point increase in September 2026.
Discussing artificial intelligence, Jefferson said the technology would significantly boost productivity, but its effects would emerge gradually. It could increase output and income while creating difficulties for some workers and businesses. He warned that unemployment could rise if AI replaces workers faster than they can adapt and retrain.
Jefferson said monetary policy can respond to temporary declines in employment and spending, but cannot address structural changes in the labor market that determine long-term employment levels. He also said the adoption of AI could raise borrowing costs across the economy if businesses continually increase investment to keep pace with higher long-term productivity growth.
Source: VietVance
