WASHINGTON, D.C. (AP) -- Federal Reserve Governor Philip Jefferson said on Friday that inflation is still too high. He added that there have been 'little' progress made in bringing the rate down to 2%. This was a pessimistic view given that a report released earlier this week indicated that prices might be slowing.
Jefferson, who had been nominated earlier by President Joe Biden to the position as Fed vice chair, said also in a speech given at the Hoover Institution, in California, that the turmoil within the U.S. Financial System following the failures of three large banks would likely only have a limited effect on the economy.
Jefferson's possible elevation to No. The Fed's seven members would be able to give Jefferson a greater say in interest rate policy, and he could become a close friend of Chairman Jerome Powell.
Jefferson stated that the drop in inflation from June's peak to March's 4.2% was due to a decrease of 2.75 percentage points.
He said, "The bad news is there hasn't been much progress on core inflation." Core prices are those that exclude volatile categories such as food and energy and are therefore considered a more accurate measure of inflation.
Jefferson cited another closely watched metric, often cited Powell, that tracks prices for services from medical care to eating out, but excludes energy and housing costs. Jefferson stated that this measure "has not shown any signs of slowing down".
The Fed suggested in a recent statement that, following its most recent policy meeting, held last week, it might pause interest rate hikes at its next meeting, scheduled for June. This is after raising its key rate ten times in a single row. The Fed's interest rate hikes aim to slow down spending, growth and inflation.
Jefferson didn't indicate in his remarks if he would be supportive of such a pause.
Many Fed officials closely monitor the impact of three major banks failing in the last two months. Recent Fed data showed that banks had been tightening lending practices for several months, and that this trend was slightly accelerated in response to the failure of three large banks.
The Fed's key rate could be raised if banks are less willing to lend.
Jefferson said that he did not expect the bank failures to have much of an impact on the economy. He believes they will only have a'mild retardant effect,' but added that it was too early to say.
His remarks followed a Wednesday report that showed the inflation rate ticked slightly down in April but remained high. Consumer prices increased 4.9% compared to a year earlier, compared to a 5% increase in the previous month. This is the lowest increase year-over year for two years. The consumer price index, however, has dropped further than the preferred measure of the Fed. This will be updated on May 26.
Michelle Bowman, one of Jefferson's Fed colleagues, spoke in Europe earlier on Friday and expressed her disappointment at the progress that has been made so far to tame inflation. She suggested that she may support another rate increase at the June meeting.
Bowman stated that if inflation remains high and labor markets remain tight, further rate hikes 'will be likely appropriate' in order to reduce inflation.
Recent inflation and job reports have not shown consistent evidence of a downward trend in inflation.
In an interview with The Associated Press, Tom Barkin expressed his disappointment at the stubbornly high inflation levels in a Wednesday.
Barkin stated that core inflation has been stuck at 0.3%-0.5% range for several months. 'You'd like to see it moving downwards and in line with our target.