Chair Powell’s Insights: Navigating the Current Economic Outlook and What It Means for You

Good to be here, Professor Rajan. Let’s dive into the state of our economy and the direction of monetary policy.

At the Federal Reserve, we’re focused on two main goals set by Congress: maximum employment and stable prices. Despite some uncertainty, the U.S. economy remains strong. We’re near full employment, but inflation is still slightly above our target of 2%.

Now, let’s look at some recent data. We will soon see the first reading of GDP for the quarter. Current figures suggest a slowdown compared to last year’s robust growth. While motor vehicle sales are doing well, overall consumer spending has risen just a bit. Businesses are also importing more goods, likely in anticipation of future tariffs, which may impact GDP negatively.

Surveys show that both households and businesses are feeling less optimistic and are uncertain about what lies ahead, often due to concerns over trade policy. Many economists are lowering their growth forecasts for the year. Yet, most still expect positive growth, even if it’s on the slower side.

Looking at the job market, we saw nonfarm payrolls increase by 150,000 jobs monthly in the first quarter. Job growth has slowed compared to last year, but few layoffs and a stable unemployment rate suggest a balanced labor market. Interestingly, the number of job openings is still above the number of people looking for work, which is similar to pre-pandemic times. Wage growth is stabilizing but continues to outstrip inflation, indicating a healthy job market overall.

As for inflation, it’s significantly lower than the highs we saw during the pandemic, with no major spike in unemployment. However, it still hovers above the target. For instance, data shows that personal consumption expenditures (PCE) rose by 2.3% year-on-year through March, with core PCE prices increasing by 2.6%. We’re making progress, but the journey isn’t over yet.

Looking ahead, the new Administration is introducing big changes in trade, immigration, fiscal policy, and regulations. The potential impacts of these changes are uncertain. We expect the tariffs announced could lead to higher inflation and slower growth. Many businesses and economists have noted a rise in short-term inflation expectations, largely tied to these tariffs, though long-term wishes for inflation are relatively stable.

As we learn more about these policies, we will better understand their impacts and what that means for monetary policy. It’s likely we’ll see some initial inflation from the tariffs, but how long-lasting that is remains to be seen. It really depends on how severe the changes are and how fast they affect prices.

Our goal is to keep inflation expectations stable to avoid any long-term inflation issues. We are committed to balancing employment and price stability. If we find ourselves at a point where these goals conflict, we would need to evaluate our proximity to each target and the timelines for correcting any imbalances.

As Ferris Bueller once said, “Life moves pretty fast.” Right now, we’re in a good position to observe and analyze more data before making policy changes. We recognize that high unemployment or inflation can hurt families, communities, and businesses. Our mission is to maintain both maximum employment and price stability.

Thank you. I’m eager to hear your thoughts.

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