Federal Reserve Vice Chair Philip Jefferson stated he is "cautiously optimistic" about the U.S. economic outlook, suggesting that strong productivity growth could help bring inflation back to the central bank's 2% target.

In prepared remarks for a speech in Washington on Friday, Jefferson said, "I anticipate that the process of inflation decline will resume this year as tariff increases are more fully passed through to prices. Furthermore, anticipated robust productivity growth may provide additional support in driving inflation back to our 2% target."

Given the Fed's "strong commitment to returning inflation to the target level, the risk of a one-time shift causing persistent inflation is likely low," he stated. "This implies greater room for the supply side of the economy to develop without the need for preemptive monetary policy tightening."

Following three consecutive interest rate cuts in the second half of 2025, Fed officials held the benchmark rate steady last week, indicating an improved outlook for the economy and labor market and suggesting they see no immediate need for further rate reductions.

"In my view, these actions have placed the federal funds rate largely within the estimated range of the neutral rate, while maintaining a balanced approach to advancing our dual mandate objectives," Jefferson commented. "I believe the current policy stance is well-positioned to respond to economic developments, placing the economy in a favorable position as it moves forward."