Fed’s Jefferson says economy near maximum employment

The Vice Chairman, Philip Jefferson, continues to cross the wires. He said that “inflation has resulted from a cascade of shocks” at the Darden School of Business, University of Virginia, Charlottesville, Virginia.

He commented that inflation expectations show the Fed is credible in tackling inflation, that the “Fed is firmly committed to returning inflation to 2% in a timely manner,” and that the economy is close to “maximum employment.”

Key highlights:

Inflation has resulted from a cascade of shocks

Longer-term inflation expectations show the Fed is credible on getting inflation down

The Fed has to be prepared to do the needed work to validate inflation expectations

Fed is firmly committed to returning inflation to 2% in a timely manner

The economy is quite close to maximum employment

Fed has more space to focus on inflation mandate right now

There is great wisdom in the Fed's dual mandate

It's possible AI will power big productivity gains down the road

I encourage the responsible development of AI

It is hard to say what AI has done to natural rate estimates so far

The Fed does not have great insight into private credit developments