Fed’s Jefferson: high uncertainty could justify aggressive policy

(Reuters) – Federal Reserve Vice Chair Philip Jefferson on Wednesday closed a daylong Fed conference with the observation that operating under uncertainty is a challenge for central bankers and that, in a couple of specific cases, uncertainty could warrant an aggressive, rather than a gradual, policy response. 

Jefferson did not use his prepared remarks to give any comments on his economic or policy outlook.

But he did say, quoting Fed Chair Jerome Powell in a 2018 speech, that in some uncertain situations — when there is a risk of a financial crisis, or when inflation expectations are at risk of becoming unanchored — the cost of doing too little outweighs the cost of doing too much. 

“If (inflation) expectations were to begin to drift, the reality or expectation of a weak monetary policy response would exacerbate the problem,” he said in prepared remarks.

Powell and other policymakers have recently said they feel inflation expectations are currently well-anchored. 

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