In a recent conference held in Florida, Federal Reserve Vice Chairs Philip Jefferson and Michael Barr emphasized their stance on maintaining current interest rates until they see sufficient evidence of falling inflation. The two governors join other central bank officials in reiterating a "higher-for-longer" approach to monetary policy.

During his speech at the Atlanta Fed conference, Barr highlighted the disappointing inflation figures witnessed in the first quarter as the primary reason for keeping rates unchanged. By allowing more time for the effects of restrictive policies to take hold, he believes they are in a favorable position to closely monitor evolving conditions.

Jefferson, echoing Barr's sentiment, acknowledged the April reading of the Consumer Price Index (CPI), which showed some improvement in inflation. However, he stressed that it was not substantial enough to warrant a change in their approach. Jefferson looked specifically at the Federal Reserve's preferred measure of inflation, the "core" Personal Consumption Expenditures (PCE) index, and noted that it indicated persistently high inflation over the first four months of the year. According to analysis from Federal Reserve staff, core PCE prices have risen by an estimated 4.1% during this period, well above the staff's 2.75% estimate for the 12-month change. The Federal Reserve's target is to achieve a 2% inflation rate.

Jefferson also anticipates a slowdown in consumer spending later this year, attributing it to the impact of high interest rates. Despite the recent strong performance of consumer spending, Jefferson believes that the restrictive territory of the current policy rate will eventually curb expenditure.

In April, the core Consumer Price Index, which excludes food and energy prices, recorded a year-on-year increase of 3.6%, marking a slight cooling from the 3.8% increase observed in the previous month. Monthly core price increases remained in line with expectations, registering at 0.3%, down from the 0.4% seen in the preceding three months.

Federal Reserve Chair Jerome Powell, in a recent statement, made it clear that the central bank would require more than one quarter's worth of data before making a decisive judgment on the trajectory of inflation. This suggests that the Fed will need at least three inflation reports to gain confidence in lowering rates from their 23-year high. Should the data support such a move, analysts predict the first rate cut to potentially happen in September. Currently, investors are pricing in just under a 50% probability of a rate cut in September, with diminished odds for a subsequent rate cut.

As the debate on inflation continues, the Federal Reserve remains committed to closely monitoring economic indicators and making informed decisions to navigate the uncertain path ahead.