Federal Reserve Vice Chairman Jefferson: Focus on policy-driven inflation risks, downplay the impact of Moody's downgrade

According to the Zhitong Finance APP, in the context of profound adjustments in U.S. trade and regulatory policies, Federal Reserve Vice Chairman Jefferson stated that the Federal Reserve must ensure that price increases triggered by changes in Washington's policies do not evolve into persistent inflation.

Jefferson pointed out during a Q&A session at the 2025 Atlanta Federal Reserve Financial Markets Conference held in Fernandina Beach, Florida, on Monday: "I believe one of the important tasks of monetary policy is to ensure that any rise in price levels does not translate into sustained inflationary pressures."

Currently, U.S. President Trump has implemented extensive new tariff measures against multiple trading partners and has proposed and pushed for a series of changes in immigration and regulatory policies. Economists generally expect that these policies may push up inflation levels and have a certain suppressive effect on economic growth, although the final extent of the tariffs and their specific impact on the economy remain highly uncertain.

Jefferson stated that in the current highly uncertain situation, "adopting a wait-and-see strategy is the appropriate approach; we need to wait for policies to gradually take effect and observe their actual impact on the economy."

Despite facing a volatile policy environment, the Federal Reserve has maintained its benchmark interest rate unchanged since 2025, reasoning that there has not yet been an urgent need to adjust rates given the current robust economic fundamentals. Federal Reserve officials have consistently emphasized the need to ensure that the American public's long-term inflation expectations remain stable in policy-making.

In his remarks that day, Jefferson reiterated this position, stating that the current monetary policy is "in a very good position" and still has a "moderately restrictive" effect on the economy. "We will ensure that monetary policy always maintains its anchoring effect on expectations while waiting for the comprehensive impact of various policies to gradually emerge."

When asked whether Moody's downgrade of the U.S. credit rating last Friday would affect the Federal Reserve's policy direction, Jefferson responded that this decision would not change the Federal Reserve's responsibilities and stance. "We will treat this rating downgrade like all external information. It will not change our responsibilities, nor will it change our policy logic."