The strong job market may make it hard for the U.S. central bank to bring down inflation, Federal Reserve Gov. Philip Jefferson said on Friday. “The ongoing imbalance between the supply and demand for labor, combined withthe large share of labor costs in the services sector, suggests that high inflation may come down only slowly,” Jefferson said in a speech at a University of Chicago Booth School of Business conference in New York.
Jefferson said that recent data shows that wage growth has started to decelerate somewhat over the past year but noted that it is still running too high to return inflation to the Fed’s 2% target “in a timely and sustainable fashion.” He said that the inflationary forces impinging on the U.S. economy “represent a complex mixture of temporary and more long-lasting elements that defy simple, parsimonious explanation.” Jefferson was commenting on a new paper by several prominent Wall Street economists who concluded that additional interest-rate hikes are necessary in order to bring inflation down to the Fed’s 2% target by 2025. The authors said this tightening is likely to lead to a mild recession. Stocks
were lower on Friday after a hot personal consumption expenditures, or PCE, inflation reading for January. The yield on the 10-year Treasury note
rose to 3.94%.