Thank you for the warm welcome! Today, I want to discuss how monetary policy impacts our economy, emphasizing the importance of clear communication. Journalists like you play a crucial role in helping the public understand these complex issues. So, let’s dive into the current economic landscape.
At the Federal Reserve, our main goals are to promote maximum employment and stable prices. Although uncertainty looms over us, there are still positive signs in the economy. We’re seeing solid growth, a balanced job market, and inflation moving closer to our target of 2%, though it remains slightly elevated.
Current Economic Snapshot
Recently, many experts have predicted slower economic growth this year. We’re set to release the first-quarter GDP data soon, and early indicators suggest a slight slowdown may be ahead. Interestingly, surveys show that households and businesses are feeling increasingly uncertain, especially regarding trade policies. This mix of hard and soft data is something we’re carefully monitoring.
The labor market seems stable, showing no alarming signs of inflation. As of March, the unemployment rate sits at 4.2%, consistent with levels we’ve seen for more than a year. In the first quarter of this year, businesses added an average of 150,000 jobs each month, reflecting a solid working environment characterized by low layoffs.
On the inflation front, we’ve made notable progress. Inflation has decreased significantly from its peak in mid-2022 without triggering a substantial rise in unemployment, which is often the case in tight monetary conditions. However, inflation has recently slowed in its decline, with total prices increasing by 2.5% over twelve months ending in February. Core prices, which exclude food and energy, rose by 2.8%. Looking ahead, higher tariffs will likely affect prices in the months to come, boosting short-term inflation expectations. Interestingly, surveys indicate that long-term expectations still align well with our 2% goal.
Navigating Monetary Policy
We recognize the challenging environment we’re in, with uncertainties surrounding inflation and employment levels. The new Administration is stepping forward with significant policy changes affecting trade, immigration, fiscal policy, and regulations. Our focus is to adapt our monetary policy based on these changes without voicing opinions on the policies themselves.
Understanding the potential impact of tariffs is crucial. We’re still uncovering how existing and proposed tariffs will shape the economy, with early signs pointing to higher inflation and slower growth. How long these effects will last and their magnitude remains unclear. It is vital to keep long-term inflation expectations stable to avoid setting a cycle of continuous inflation in motion.
Looking Forward
As we continue to assess new data and the forward economic outlook, we’re poised to respond wisely. For now, it’s premature to determine our future path for monetary policy.
In conclusion, a thriving economy with ample job opportunities and controlled inflation is our goal. We understand that rising unemployment and inflation can pose serious issues for families and businesses. Rest assured, the Federal Reserve is committed to achieving these crucial objectives.
I’m eager to hear your questions!
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