By Nicole Goodkind

Federal Reserve officials are aligned on one thing: Inflation isn't falling fast enough. Less clear is what to do about it.

Four Fed governors speaking Thursday evening -- Philip Jefferson, Michael Barr, Lisa Cook, and Stephen Miran -- agreed that price pressures remain elevated but offered different views on how policymakers should respond, highlighting a growing divide inside the central bank.

Inflation remains near 3%, well above the Fed's 2% target, with officials citing tariffs, rising energy prices, and geopolitical tensions as forces likely to keep price growth elevated in the near term. The Fed's latest projections show inflation ticking up and staying above target through next year, even as economic growth holds steady.

The Fed left rates unchanged at its March meeting, extending a pause after three successive cuts late last year. While policymakers, in aggregate, still expect to lower borrowing costs modestly this year, some officials have signaled little room to cut if inflation remains persistent, while others project four cuts this year.

Vice Chair Jefferson framed the challenge as a balancing act in comments at the Federal Reserve Bank of Dallas on Thursday evening. He described an outlook with "downside risk to the labor market and upside risk to inflation."

Hiring has slowed in recent months and job growth has hovered near zero, even as unemployment remains relatively low at 4.4%. At the same time, a recent increase in energy prices tied to the war in the Middle East and the lingering effects of tariffs are pushing inflation risks higher.

For some policymakers, that means more caution. Barr said it "makes sense to take some time to assess conditions," stressing the risk that inflation could prove more persistent. Speaking at the Brookings Institution on Thursday, he warned that "the longer inflation remains above 2%, the greater the risk that it becomes entrenched in expectations."

Cook, speaking at the Yale School of Management on Thursday, expressed a similar concern about the near-term outlook, noting that uncertainty has increased and that the balance of risks has shifted increasingly toward inflation. At the same time, she described the labor market as "in balance, but precariously so," reflecting a slower pace of hiring and a more fragile equilibrium.

Miran, speaking from the Economic Club of Miami on Thursday evening, argued that policymakers should be cautious about reacting too strongly to the latest rise in inflation. He suggested that increases tied to energy prices may be temporary and less responsive to monetary policy, and pointed to signs that the labor market has been cooling for several years.

He also said that productivity increases may soon change the outlook. Advances in artificial intelligence, along with deregulation, could boost output without adding to inflation, he said, potentially giving the Fed more room to lower rates even if inflation remains above target.

The difference reflects a larger question facing the central bank: whether the current inflation backdrop requires maintaining restrictive policy, or whether emerging signs of economic softening and improving supply conditions justify a more gradual shift.

Inflation has proved harder to bring down than expected. The labor market is holding up but showing signs of strain. And the outlook is complicated by forces that may push inflation higher in the near term even as longer-term pressures ease.

Write to Nicole Goodkind at nicole.goodkind@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 27, 2026 11:00 ET (15:00 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.