00:00Looking ahead, I'm cautiously optimistic.
00:02Growth this year should get a boost from easier financial conditions,
00:06recent interest rate reductions, and fiscal support, amongst other factors.
00:11Businesses tell us that they're expecting some firming and activity,
00:14and bankers in our district say projects that were on hold last year are starting to move forward.
00:19Brighter growth prospects should translate into stronger demand in the labor market,
00:23helping to reduce the unemployment rate over the course of this year.
00:27Inflationary pressures should start to ease as tariff rates stabilize.
00:31Of course, there are no guarantees when it comes to forecasts,
00:34and there are considerable uncertainties around mine.
00:37Ultimately, I want to see evidence that inflation is indeed coming down.
00:43There's a risk that inflation could persist near 3% through this year, as it has for the past two years.
00:49Or inflation expectations could show signs of becoming unanchored
00:52if the public sees the elevated readings the last five years as a sign that policy is not committed to achieving our 2% goal.
01:00On the other side, stabilization in the labor market could give way to additional softening if economic growth disappoints.
01:07Two weeks ago, the FOMC kept the target range for the federal funds rate steady at 3.5% to 3.75%, a decision I voted to support.
01:18I believe we are in a good position to keep the funds rate at this level and see how things play out.
01:23By many estimates, including my own, the funds rate is now in the vicinity of neutral, meaning it's not meaningfully restraining the economy.
01:32If we see progress on both sides of our mandate, that tells me that policy is already at the right setting and that we should hold it there.
01:39Rather than trying to fine-tune the funds rate, I'd prefer to err on the side of patience as we assess the impact of recent rate reductions and monitor how the economy performs.
01:51Based on my forecast, we could be on hold for quite some time.
01:56To me, a steady funds rate would reflect positive economic developments,
02:01though holding rates near neutral might slow the return of inflation all the way down to 2%.
02:05If my forecast doesn't materialize, then policy would need to respond accordingly.
02:10Right now, I see the risks of a higher or lower path for the funds rate as about balanced.
Comments