The U.S. dollar is showing limited volatility today, but several Federal Reserve members continue to comment on the economic outlook and monetary policy in the U.S. Below are remarks from Philip Jefferson, who suggested that both higher inflation (though uncertain if persistent) and slower economic growth are possible.
Fed’s Jefferson
- Q1 GDP data overstated the pace of the economic slowdown. Whether tariffs lead to persistent inflation depends on how they are implemented, how supply chains respond, and several other factors.
- The labor market remains solid. Tariffs could result in higher inflation, but it is unclear whether the effect will be temporary or lasting.
- I expect slower growth due to trade policy, but I still anticipate that the economy will expand this year.
- Recent inflation data is consistent with further progress toward the 2% target, but the future path remains uncertain due to trade dynamics.
- I am closely watching hard data for signs of weakening economic activity. The current moderately restrictive policy rate is well-positioned to respond to evolving economic conditions.
EURUSD Update
The EURUSD pair has erased some of the gains from earlier in today’s session. Markets are currently pricing in around 55 basis points of Fed rate cuts this year, but most statements from Fed officials suggest no rush to adjust policy. EURUSD pulled back after reaching the 71.8% Fibonacci retracement of today’s earlier downward move.
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Source: xStation5
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