In remarks on Staten Island on March 30, 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:
“The year began with the U.S. economy on a good footing. Despite heightened uncertainty around the impact of trade and other policies, the economy has been resilient, with growth remaining solid through last year and into the beginning of this year.”
“Recent developments in the Middle East have added a great deal of uncertainty around economic activity in that region and for the U.S. economy.”
“This is an unusual set of circumstances. But the current stance of monetary policy is well positioned to balance the risks to our maximum employment and price stability goals.”
“In assessing the future path of monetary policy, my views, as always, will be based on the evolution of the totality of the data, the economic outlook, and the balance of risks to the achievement of our maximum employment and price stability goals.”
President Williams focused his remarks on what’s unfolding in the economy across the country and around the globe. He began by noting at a high level that the economy has been “resilient,” pointing to solid growth, resilient consumer spending, strong business investment, and a stabilized unemployment rate. He also said that inflation remains elevated due to the effects of tariffs, but that “those effects should begin to dissipate later this year.”
With regard to the employment side of the Fed’s dual mandate, President Williams said there have been “mixed signals.” He did say, however, that recent indicators of labor market conditions “do not point to a sharp change in the balance between labor demand and supply,” with the unemployment rate fluctuating in a narrow band of 4.3 to 4.5 percent since last July.
“One cautionary signal is around households’ labor market expectations,” President Williams explained, with perceptions of jobs availability published by surveys trending downward. “The Survey of Consumer Expectations (SCE) measure, in particular, may foreshadow a further decline in job-finding rates in coming months.”
Turning to price stability, President Williams said: “While the labor market has been sending an unusual set of mixed signals, inflation is experiencing its own unusual crosscurrents due to the effects of tariffs and developments in the Middle East.” He pointed to the Personal Consumption Expenditures (PCE) price index, where inflation is currently hovering around 3 percent, and he estimates that tariffs are contributing between one half and three quarters of a percentage point to this figure. He went on to say that “the significant increase in energy prices resulting from developments in the Middle East will likely boost overall inflation in coming months, but these effects should partially reverse later this year, assuming oil prices come down after hostilities cease.”
“Uncertainty around the future path of inflation is high,” President Williams told the audience. “The conflict in the Middle East could result in a large supply shock with pronounced effects that simultaneously raises inflation—through a surge in intermediate costs and commodity prices—and dampens economic activity.” He noted that this has begun to play out already, pointing to supply chain disruptions related to the supply of energy and related goods.
President Williams went on to say that the “residual effects of tariffs and higher energy prices should increase headline inflation in the short term.” He did add that there are some positive trends, however, including that “most survey- and market-based measures of longer-term inflation expectations—including the New York Fed’s Survey of Consumer Expectations—are at levels consistent with the FOMC’s 2 percent goal.”
He said despite the circumstances, “the current stance of monetary policy is well positioned to balance the risks to our maximum employment and price stability goals.” He cited the recent FOMC decision to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent.
President Williams closed by saying that it is an “unusual time” for the economy. “There are substantial risks, and uncertainty is high—particularly around the economic effects of the Middle East conflict.”
In terms of his economic outlook, President Williams said he expects:
- Real GDP growth to be close to 2-1/2 percent this year, reflecting tailwinds from fiscal policy, favorable financial conditions, and investment in AI.
- With growth running above potential, he expects the unemployment rate to edge down over this year and next.
- And with various short-term factors affecting prices, he expects overall inflation to come in at around 2-3/4 percent this year, before reaching the FOMC’s longer-run 2 percent target 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.
