“I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy,” Jefferson said in remarks to the National Association for Business Economics.
The remarks by Jefferson and earlier by Dallas Fed president Lorie Logan, one of the Fed system's more influential voices on financial markets, caused investors to undercut the likelihood of further Fed rate increases.
"If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed funds rate," said Logan, who has been among the more hawkish officials in supporting the need for continued rate increases.
Since the Fed last raised its policy interest rate a quarter of a percentage point in July, long-term bond yields have risen a full percentage point, a fast rate of change for a massive market.
A rise in the so-called “term premium," if it proves persistent, could put an enduring drag on the economy and perhaps give the Fed less reason to raise its own policy rate.
Persons:
Philip Jefferson, ” Jefferson, Jefferson, Lorie Logan, FedWatch, Gregory Daco, Logan, policymaker, Chris Varvares, Howard Schneider, Andrea Ricci, Nick Zieminski
Organizations:
DALLAS, Federal, Treasury, National Association for Business Economics, Dallas, New York Fed, Fed, P, Thomson
Locations:
U.S, Jefferson, Israel