BAF NEWS

• 25 basis points: size of last month’s policy rate cut, which Jefferson supported.
• Nov. 17, 2025: date of Jefferson’s remarks, outlining a careful path forward.
• One meeting at a time: his approach while data flows remain uncertain.

Context: Fed Policy and Recent Rate Cut

Jefferson backed last month’s quarter-point cut. “I supported last month’s decision to reduce our policy rate by 1/4 percentage point,” he said in remarks on Nov. 17. He added that policy is “still somewhat restrictive,” though it is now closer to a level that neither stimulates nor restrains growth. According to his prepared text and subsequent coverage, that shift reflects recent trade-offs in the outlook. ^[1]

Zoom in: Jefferson’s framing matters for the path ahead. While the cut moved policy closer to neutral, he emphasized that restraint remains in force. Markets, businesses, and households should therefore expect a careful cadence rather than a quick pivot. ^[1]

Call for Caution as Rates Approach Neutral

Jefferson urged caution as the policy rate nears neutral. “The evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate,” he said. In Fed shorthand, the neutral rate is the level that neither speeds up nor slows the economy. ^[2]

However, moving slowly is not stalling. Instead, it is risk management while the economy adapts to earlier tightening and a first small reduction. Moreover, it signals sensitivity to both inflation persistence and labor-market cooling. ^[3]

The upshot: A faster cutting cycle could overshoot if inflation proves sticky. But moving too slowly could tighten real conditions if inflation cools faster than expected. Jefferson is steering between those outcomes for now. ^[1]

Shifting Balance of Risks: Employment vs. Inflation

Jefferson assessed that employment risks have risen relative to inflation risks. As he put it, “I see the balance of risks… with increased downside risks to employment compared to the upside risks to inflation.” He also said inflation risks have “eased somewhat,” while not declaring victory. ^[3]

Consequently, the policy lens has adjusted. Cooling labor demand now weighs more heavily in decisions, even as officials watch for renewed price pressures. Still, he described the stance as deliberate, not reactive. ^[3]

Pros and cons:

• Pros: Slower cuts help avoid reigniting inflation if momentum lingers. ^[1]
• Cons: Slower cuts risk more labor-market damage if growth fades faster. ^[3]

Uncertainty from Data Delays

Shutdown-related delays have limited visibility. “It remains unclear how much official data we will see before then,” Jefferson noted, referring to the next policy meeting. Because of that uncertainty, he said he “always take[s] a meeting-by-meeting approach.” ^[4]

Therefore, near-term decisions hinge on whatever data arrive in time. Additionally, officials will weigh alternative indicators to fill gaps. However, the bar for rapid shifts likely stays high without a comprehensive picture. ^[4]

What’s next: As the data flow revives, the committee’s debate may sharpen. Some policymakers remain wary of easing too far, too fast. Others emphasize labor risks and the need to prevent overtightening. ^[5]

No Commitment to December Rate Cut

Jefferson did not commit to a December move. He neither endorsed nor rejected another cut, leaving room to respond to new evidence. Coverage underscored that divisions among officials persist despite the recent step toward neutral. ^[4]

Even so, his guidance was consistent: proceed slowly, weigh the risks, and avoid presumption. As a result, December’s outcome will reflect both incoming data and evolving risk assessments. For now, he keeps the option set open. ^[4]

The upshot: Policy is edging toward neutral, but not in a hurry. Risks have shifted, data are imperfect, and the committee is divided. Therefore, expect a cautious, meeting-by-meeting path.

Editorial persona: The Pragmatic Analyst