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Fed Vice Chair Philip Jefferson’s speech today offered insights into the monetary policy outlook and identified key risks in the coming months. He suggested that, assuming the economy develops as anticipated, “it will likely be appropriate to begin dialing back our policy restraint later this year.”

He highlighted three principal risks that warrant close monitoring. First, consumer spending could be “more resilient” than expected, which could inadvertently halt progress on inflation. Second, the possibility of employment weakening as the factors currently bolstering economic growth begin to wane. Jefferson addressed geopolitical risks, specifically the possibility of escalating conflicts in the Middle East and their broader impact on commodity prices, such as oil, and global financial markets.

Overall, Jefferson remained “cautiously optimistic” on the progress on inflation, and emphasized the importance of considering the “totality of incoming data” in shaping Fed’s policy decisions.

Full speech of Fed’s Jefferson here.

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