Fed's Jefferson Says Current Policy Is Well Positioned

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00:00I am starting 2026 with a cautiously optimistic point of view.

00:05Conditions in the labor market appear to be stabilizing,

00:09and I see the economy as well-positioned to continue to grow

00:13while inflation returns to a pathway towards our 2% objective.

00:19The most recent data indicate that economic activity has remained strong.

00:24The third quarter of 2025, gross domestic product rose at an annual rate of 4.3%.

00:32As you can see in figure one, that was a sharp acceleration from the first half of last year,

00:40mostly reflecting strong consumer spending and an upward swing in net exports, which can be volatile.

00:48Business fixed investment grew at a solid rate in the third quarter,

00:52while residential investment continued to be soft.

00:57Fourth quarter growth is likely to be restrained due to the effects of the government shutdown.

01:04Still, excluding those effects, I see the economy expanding at a solid pace of about 2% in the near term.

01:14Although I am cautiously optimistic about the path ahead,

01:19As a monetary policymaker, I do confront a challenging situation.

01:26With the downside risk to employment having risen last year,

01:31I view the balance of risk as having shifted.

01:36As a result, I supported the FOMC's decisions to reduce the policy rate last year.

01:44I viewed that as the right step to balance the upside risk of persistent above-target inflation

01:53and the downside risk of a deteriorating labor market.

01:58This policy stance puts the economy in a good position moving forward.

02:04As shown in Figure 7, since the middle of 2024,

02:10the committee has reduced the policy rate by 1.75 percentage points.

02:17In my view, those moves have brought the federal funds rate into a range consistent with the neutral rate,

02:26a rate that neither stimulates or restricts economic activity.

02:31I look forward to our upcoming policymaking meeting, which will be held in less than two weeks.

02:40While I do not want to prejudge the decision that will take place there,

02:47in my view, the current policy stance leaves us well positioned to determine the extent and timing

02:56of additional adjustments to our policy rate based on the incoming data,

03:04the evolving outlook, and the balance of risks.