In remarks at Pace University on February 11, New York Fed President John Williams discussed the economy and monetary policy. He also offered his economic outlook.
He said:
“From where the economy has been to where it’s going, one commonality is that it’s faced tremendous uncertainties. From where we are now, the economy is in a very good place.”
“The [Federal Open Market] Committee’s 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 goals.”
“I remain strongly committed to bringing inflation back to our 2 percent target on a sustained basis, while being watchful to risks to both sides of our dual mandate.”
In his remarks, President Williams said, “In a nutshell, what the data tell us is that 2024 is the year the economy returned to balance, or ‘equipoise’ as I like to say.”
While inflation remains elevated at 2.5 percent, as measured by the personal consumption expenditures price index, President Williams said it has made significant strides toward the FOMC’s longer-run goal of 2 percent. In addition, he said that the labor market is back to more normal levels and that real GDP has shown strong growth, “powered by robust gains in the labor market and productivity.”
The economy entered 2025 in a good place, President Williams said, “with the labor market now in balance.” He added that “a number of signs indicate that inflation will continue to move toward our 2 percent longer-run goal—although it will take time before we can achieve that target on a sustained basis.”
He said monetary policy is well positioned to achieve the FOMC’s dual mandate goals of maximum employment and price stability. “The modestly restrictive stance of policy should support the return to 2 percent inflation while sustaining solid economic growth and labor market conditions,” he said. “But it’s important to note that the economic outlook remains highly uncertain, particularly around potential fiscal, trade, immigration, and regulatory policies.”
Based on the data today, President Williams expects:
- Real GDP growth to move to around 2 percent in 2025 and 2026, which is near his estimate of its long-run potential rate.
- The unemployment rate to remain essentially flat at around 4 to 4-1/4 percent.
- And overall inflation to remain around 2-1/2 percent this year, then decline to the FOMC’s 2 percent goal in the coming years.
Judy DeHaven 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.
