In remarks at the University of Virginia’s Darden School of Business, Federal Reserve Board Vice Chair Philip N. Jefferson said inflation risks remain tilted to the upside while risks to economic activity and employment are roughly balanced. He supported the Federal Open Market Committee’s September increase in the federal funds target range by 25 basis points to 3.75 percent to 4 percent and said future adjustments should depend on incoming data, the evolving outlook and the balance of risks. Assessing the appropriate stance may take more time as policymakers determine whether underlying inflation is returning to target quickly enough. Jefferson expects near-term economic growth to remain close to the 2.4 percent pace recorded in the first half of 2026, supported by artificial intelligence investment. He also expects unemployment, which was 4.1 percent in August, to remain near its current level through year-end. Inflation presents the greater concern: 12-month personal consumption expenditures inflation reached 3.4 percent in August, driven partly by energy prices, while some core services and goods pressures have increased. His baseline is for inflation to remain elevated in the short term before declining toward 2 percent as price shocks fade, although geopolitical developments and stronger-than-expected demand could delay that process.

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