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Jefferson did not describe his economic outlook or his specific
policy path preference in his remarks, prepared for delivery to
a research conference in Zurich, Switzerland.
But he did note that economic uncertainty by many measures
spiked during the COVID-19 pandemic and that inflation
uncertainty in particular remains unusually high.
Jefferson emphasized that central bankers must take uncertainty
into account when making policy, with the economic literature
laying out two very different approaches -- one that counsels
gradualism in the face of uncertainty, and the other that calls
for stronger-than-usual monetary medicine.
"One case of perennial interest to central bankers is inflation
persistence," Jefferson said, where both approaches outlined in
the literature "tend to lead to policy that is stronger than the
certainty equivalent case to forestall the possibility of
inflationary forces becoming embedded in inflation
expectations."
The Fed has taken aggressive action against high inflation,
raising the policy rate by 5.25 percentage points over the
course of 18 months to its current range of 5.25%-5.50%, which
was reached in July.
Inflation has come down from the summer of 2022's 40-year-highs,
and is now at around 3.4% by the Fed's preferred measure.
Inflation expectations softened in October, a New York Fed
survey showed this week.
Fed Chair Jerome Powell has left the door open to further policy
tightening should progress toward the Fed's 2% inflation goal
stall out.
(Reporting by Ann Saphir; Editing by Leslie Adler)
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