‘Still learning’ impact of tighter monetary policy By Reuters

By Howard Schneider

LEXINGTON, Virginia (Reuters) – The U.S. Federal Reserve is “still learning” how much impact its interest rate increases have had on the economy and inflation, Federal Reserve Governor Philip Jefferson said on Monday.

Inflation “has started to come down,” with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains, Jefferson said in remarks prepared for delivery at an event at Washington and Lee University.

But “monetary policy affects the economy and inflation with long, variable, and highly uncertain lags, and we are still learning about the full effect of our tightening thus far,” Jefferson said.

He did not comment on recent bank stress or provide his views about whether the Fed should continue raising interest rates at upcoming meetings.

However inflation “should fall back” toward the Fed’s 2% target as higher interest rates discourage spending in interest-rate sensitive sectors of the economy like housing.