Federal Reserve Vice Chair Philip Jefferson said Friday he sees the central bank's benchmark interest rate as "broadly in the range of neutral" and will closely examine the data when considering any additional rate cuts.

"The current policy stance is well positioned to address the risks to both sides of our dual mandate," Jefferson said in a speech at the Brookings Institution in Washington, D.C. "Our policy stance should help stabilize the labor market while allowing inflation to resume its decline toward our 2% target."

Jefferson raised his economic outlook for the year based on signs of resilience and said he expects GDP to grow at 2.2%, similar to the growth rate in 2025.

He said there are signs the job market is stabilizing, and while downside risks to employment remain, he expects the unemployment rate will hold approximately steady throughout the year. The unemployment rate currently stands at 4.4%.

Jefferson called the labor market "roughly in balance" with a low-hire, low-fire environment continuing.

Jefferson noted that inflation's downturn has stalled over the past year on account of tariffs. He estimates inflation on a "core" basis, which excludes volatile food and energy prices, ended the year at 3% based on the Personal Consumption Expenditures index — similar to the end of 2024. But he said while there's a risk inflation could rise, he expects price increases to resume their decline once tariffs have worked their way through, especially since the price of services has dropped. He also said an increase in productivity growth could push down inflation.

"I am cautiously optimistic about the economic outlook," Jefferson said. "I see signs the job market is stabilizing, that inflation can return to a path toward our 2% objective, and that sustainable economic growth will continue."

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

Elsewhere, San Francisco Fed president Mary Daly wrote in a LinkedIn post on Friday that she still has concerns about the strength of the job market. Daly said she sees a disconnect between businesses and workers, noting that while businesses are cautiously optimistic, the workers she speaks to are concerned about the health of the job market.

Daly noted the low-hire, low-fire environment could persist, but added that "workers are aware that things could change quickly, leaving them in a no-hiring, more-firing labor market."

"With inflation printing above the FOMC's 2% goal, this rightly feels precarious," she said.

Earlier this week, Fed governor Lisa Cook voiced her own concerns about inflation, suggesting she would consider holding rates steady until there is stronger evidence that inflation is declining.

"At this time, I see risks as tilted toward higher inflation," Cook said. "Until I see stronger evidence that inflation is moving sustainably back down to target, that is where my focus will be, in the absence of unexpected changes in the labor market."

Cook warned that the longer inflation remains above the Fed's 2% goal, the greater the chance that higher inflation will become entrenched in expectations. Cook stressed that after nearly five years of above-target inflation, it is "essential that we maintain our credibility by returning to a disinflationary path and achieving our target in the relatively near future."

The Fed voted to hold rates steady in January in the range of 3.5% to 3.75%.

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.

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