In remarks in Albany on June 24, New York Fed President John C. Williams discussed what recent soft data and hard data reveal about the U.S economy, and how the totality of the data is informing his economic outlook.
He said:
“Much of the soft data we’ve seen in recent months captures the heightened uncertainty about the path of the economy. But it’s too early to say what the future trajectory of the hard data will be.”
“Maintaining [a] modestly restrictive stance of monetary policy is entirely appropriate to achieve our maximum employment and price stability goals. It allows for time to closely analyze incoming data, assess the evolving outlook, and evaluate the balance of risks to achieving our dual mandate goals.”
“As always, I remain focused on all the data . . . No matter what comes our way, I am committed to supporting maximum employment and returning inflation to our 2 percent longer-run goal.”
President Williams began his remarks by discussing soft data. “The changing landscape around fiscal and trade policies has heightened economic uncertainty among consumers, business owners, and financial market participants,” he said.
In the Federal Reserve’s Second District, New York Fed surveys of manufacturers and service firms indicate widespread concerns about tariffs. “Several of my business contacts reported pulling back on capital spending and putting hiring on hold until the economic uncertainty lessens,” President Williams said.
And nationally, the New York Fed’s Survey of Consumer Expectations showed that households have scaled back their expected spending growth on nonessential items.
However, there is some good news in the soft data: Longer-run inflation expectations have remained stable. “This is critically important, because well-anchored inflation expectations are essential for sustained price stability,” he said.
Turning to the hard data, President Williams said that much of it shows that the U.S. economy remains in a good place. Consumer spending and investment have been resilient overall. Labor market conditions remain solid. And “inflation has continued to come down from its COVID-era spikes,” he said.
“However, measures of underlying inflation—such as core inflation, which strips away volatile categories like food and energy—are still somewhat above” the Federal Open Market Committee’s 2 percent longer-run goal, President Williams said. “And there are signs that tariffs are affecting specific categories of goods.”
In a New York Fed survey of New York and New Jersey businesses, about three-quarters of respondents said they passed along at least some tariff-induced cost increases to customers by raising prices. “Indeed, almost a third of manufacturers and nearly half of service firms reported fully passing along all tariff-related cost increases,” he said.
In terms of his economic outlook, President Williams said that “in an uncertain environment, any number of outcomes can occur.” But, based on the latest data, he expects:
- Real GDP growth in 2025 to slow considerably from last year’s pace, to just over 1 percent
- The unemployment rate to rise to around 4-1/2 percent by the end of this year
- Inflation to rise to around 3 percent in 2025, then gradually decline to 2 percent over the next two years as the tariff effects fade
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.
