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New Delhi
Federal Reserve Vice Chair Philip Jefferson said that the US central bank cut its benchmark interest rate by half a percentage point last month in an attempt to preserve the strength of the labour market, even as inflation keeps falling.
"The FOMC has gained greater confidence that inflation is moving sustainably toward our 2 per cent goal," Jefferson said, referring to the rate-setting Federal Open Market Committee, of which he is a member. "To maintain the strength of the labour market, my FOMC colleagues and I recalibrated our policy stance last month."
The Fed's 50-basis-point rate cut at its Sept 17-18 meeting was bigger than many analysts had expected. Comments were prepared for delivery to Davidson College in Davidson, North Carolina, by Jefferson, who explained the policy decision in much the same terms that Fed Chair Jerome Powell has - an effort to keep the economy healthy while continuing to address inflation.
"Economic activity continues to grow at a solid pace. Inflation has eased substantially. The labour market has cooled from its formerly overheated state," Jefferson said.
Inflation by the Fed's targeted measure, the year-over-year change in the personal consumption expenditures index, was 2.2 per cent in August, "much closer" to the Fed's target of 2 per cent than it was two years ago when it stood at 6.5 per cent, Jefferson noted.
"I expect that we will continue to make progress toward that goal."
While unemployment stands at 4.1 per cent, which is up just a "limited" amount from 3.8 per cent a year ago, Jefferson said. Job growth has slowed down, however. "The cooling in the labour market is noticeable," he commented.
Speaking in language that closely echoed the Fed's post-meeting statement last month, Jefferson said he would be watching incoming data, the outlook, and the balance of risks as he considers further cuts.
"My approach to monetary policymaking is to make decisions meeting by meeting," Jefferson said. "As the economy evolves, I will continue to update my thinking about policy to best promote maximum employment and price stability."