Fed Vice Chair Philip Jefferson acknowledged that while he expects inflation to moderate later in 2026 as tariff and energy shocks fade, he emphasized that risks remain skewed to the upside. His comments align with a broader pattern of Fed officials signaling caution about declaring victory on inflation, even as base effects should mathematically ease headline readings. Energy price volatility is cited as a specific near-term wildcard.
For Armada's traditional repo desk, Jefferson's upside inflation bias is additive to the hawkish signals from Kashkari and the broader Warsh narrative. It reduces the probability of a near-term SOFR decline, keeping overnight and term repo rates sticky. This is constructive for repo income in the short term but reinforces the need to manage rollover risk on longer-dated facilities with rate-sensitive counterparties.