Federal Reserve signals caution on future rate cuts as inflation and consumer spending stay resilient

On 2026-10-01, Vice Chair Jefferson told a Federal Reserve audience that real GDP grew at a 2.4 percent annual pace in the first half of 2026, business investment has been quite strong—primarily supported by AI-related spending—and consumer spending and retail sales accelerated somewhat in the first half. Jefferson said headline inflation is being driven recently by energy prices, the 12-month change in the PCE price index was 3.4 percent in August, and inflation has exceeded 2 percent for more than five years.

Jefferson noted hiring picked up in spring and summer, layoffs have remained low, the unemployment rate ticked down to 4.1 percent in August, and the ratio of job vacancies to unemployed workers moved back above 1 this year. He said short-term inflation expectations are elevated, yields across the term structure have risen since the September FOMC meeting, and he supported the FOMC decision in September to raise the federal funds target range to 3.75–4.00 percent.

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