In remarks in New York City on July 16, New York Fed President John C. Williams discussed what the latest data are saying in light of economic uncertainty, and how he expects the effects of tariffs to take shape.
He said:
“There’s definitively heightened uncertainty about the path of the economy, but it’s too early to say what the trajectory of the hard data will be.”
“All in all, although we are only seeing relatively modest effects of tariffs in the hard aggregate data so far, I expect those effects to increase in coming months.”
“As the summer progresses and we look toward the remainder of the year and beyond, I’ll remain focused on all of the data—the soft data from surveys, the hard data we see in the real GDP growth and consumer spending, and tariffs’ effects on goods and services—and what it ultimately means for the achievement of our dual mandate goals.”
President Williams began his remarks by discussing various measures of data. “The changing landscape around trade policy has heightened economic uncertainty among households, businesses, and financial market participants,” he said. “The response to these developments and the associated uncertainty has led to interesting and sometimes contrasting dynamics in both the soft data and hard data.”
On the soft data measures, he pointed to regional business surveys conducted by the New York Fed, which have highlighted an elevated degree of uncertainty about the economic outlook over the past few months. And he cited the national Survey of Consumer Expectations (SCE), which shows that consumers’ uncertainty along a number of dimensions remains elevated—including uncertainty about future inflation.
The encouraging news on the soft data, he noted, is that longer-run inflation expectations have remained stable, while short- and medium-term inflation expectations have returned to their pre-pandemic ranges. “This is critically important, because well-anchored inflation expectations are essential for sustained price stability,” he said.
Moving on to hard data, President Williams said that by these measures the U.S. economy remains in a good place. He mentioned the solid labor market and remarked that “inflation has continued on a gradual, albeit bumpy downward path toward our 2 percent longer-run goal.”
President Williams then turned to tariffs and their effects on the prices of goods and services, noting “One question comes up a lot these days: ‘All we hear about is tariffs, tariffs, tariffs. But then why hasn’t inflation gone up?’”
He answered by explaining that we are seeing initial effects of tariff increases on core goods prices, and that because it’s still early days for the effects of tariffs, it will take time to come into full force. He also highlighted a special New York Fed survey of businesses that indicates that firms passed on at least some of the higher tariffs to their customers.
With regard to the path of monetary policy, President Williams said that “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.”
In terms of his economic outlook, President Williams said that “given all the uncertainty, a number of outcomes are possible.” But, based on the latest data, he expects:
- Real GDP growth this year to be about 1 percent
- The unemployment rate to rise to around 4-1/2 percent by the end of this year
- Inflation to come in between 3 and 3-1/2 percent in 2025, and then fall back to about 2-1/2 percent next year before reaching 2 percent in 2027
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.
