In remarks in Washington, D.C., on March 3, New York Fed President John C. Williams discussed how the Federal Reserve is working to achieve its dual mandate goals of maximum employment and price stability. He also gave his economic outlook and discussed his views on monetary policy.
He said:
“Overall, the U.S. economy appears to be on a good footing. Growth is solid, the labor market is showing signs of stabilizing, and while inflation remains above our 2 percent target, recent data have been reassuring.”
“Monetary policy is currently well positioned to support the stabilization of the labor market and return inflation to our 2 percent goal.”
“Looking further ahead, if inflation follows the path I expect, further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive.”
President Williams began his remarks by discussing the overall economy. He said that despite heightened uncertainty around the impact of trade and other policies, the U.S. economy has been surprisingly resilient. “Real GDP grew at a solid pace last year, and growth is poised to pick up steam this year,” he said.
With regard to the employment side of the Fed’s dual mandate, President Williams said that there have been promising signs of stabilization in the labor market in recent months. For example, the unemployment rate was 4.3 percent in January—which is back to where it was last July—while job growth has stabilized.
However, it continues to be a “low-hire, low-fire job market,” President Williams said, adding that “the low hiring rate, along with an increase in long-term unemployment, may be contributing to a somewhat more pessimistic perception among households than other indicators of the labor market might suggest.”
Turning to price stability, President Williams said that progress toward the Federal Open Market Committee’s (FOMC’s) 2 percent longer-run inflation goal has temporarily stalled. He said he estimates that the increase in tariffs has contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent.
However, President Williams said he is also seeing some encouraging trends. Among them: There are no signs of significant second-round effects from tariffs, no global supply-chain bottlenecks have emerged, and wage growth has remained stable at levels consistent with price stability.
With the FOMC having lowered the target range for the federal funds rate by a total of 1-3/4 percentage points over the past year and a half, President Williams said “the risks to achieving our maximum employment and price stability goals are now in better balance.”
In assessing the future path of monetary policy, President Williams said that his view, as always, “will be based on the totality of the data, the economic outlook, and the balance of risks to achieving both sides of our dual mandate goals.”
In terms of his economic outlook, President Williams said he expects:
- Real GDP to grow about 2-1/2 percent this year, supported by stimulus from fiscal policy, favorable financial conditions, and robust investments in artificial intelligence
- The unemployment rate to edge down over the course of this year and next year, as real GDP is poised for growth
- And overall inflation to come in at around 2-1/2 percent in 2026, then fall to 2 percent in 2027, as the effects of tariffs on inflation wane
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.
