In remarks in Hartford, Connecticut on January 15, New York Fed President John C. Williams spoke about the rise and fall of inflation, how monetary policy is working to achieve the Fed’s dual mandate of maximum employment and price stability, and the regional economy. He also provided his economic outlook.
He said:
“[T]he economy is in a very good place and has returned to balance, as have the risks to the two sides of our mandate of maximum employment and price stability.”
“[O]ur decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”
“Monetary policy is well positioned to keep the risks to our goals in balance.”
In his speech, President Williams began by discussing where the economy stands today, and where it’s headed. He specifically pointed to the cooling of the labor market and inflation, as well as strong GDP growth.
He said that with the economy returning to balance, the Federal Open Market Committee (FOMC) has moved its monetary policy stance from one that tightly constrains demand to one that is less restrictive.
“I’m often asked why the Fed cut rates in the face of such strong growth,” he said. “[W]hile growth in demand has been strong, growth in supply has been even stronger. Specifically, robust growth in both the labor force and in productivity has meant that the economy has been able to expand at a faster pace than we saw before the pandemic, without creating inflationary pressures.”
With regard to the two sides of the Federal Reserve’s dual mandate, President Williams detailed the dramatic fall in inflation, a process which he clarified is still continuing. “But we are still not at our 2 percent goal,” he added, “and it will take more time until we can achieve that on a sustained basis.” He then pointed to “signs of stabilization” in the labor market from its previous tight conditions.
President Williams also highlighted the regional economy, remarking that economic activity has held steady. He went on to say that in Connecticut in particular, there has been a churn in industry composition as the pandemic created a shift in the types of jobs that people have.
He closed by stating that “the path for monetary policy will depend on the data,” and “our focus is on using our tools to best achieve our goals.”
Based on what is known today, President Williams expects:
- Real GDP growth to slow somewhat to around 2 percent this year.
- The unemployment rate to remain around 4 to 4-1/4 percent this year.
- Inflation to gradually decline toward the FOMC’s 2 percent goal in the coming years.
Julie Lasson is an executive communications specialist at the New York Fed.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
