00:00The labor market seems like it has stabilized.
00:03Last year, it was gradually cooling.
00:05In the last six months or so, it seems like it's been stabilizing.
00:09The unemployment rate is around what economists call the natural rate of unemployment, so
00:14somewhere between 4% and 4.5% is that range for me.
00:20The recent payroll growth has been consistent with payroll growth that would be break-even,
00:25meaning the payroll growth that would stabilize the unemployment rate, so about 65%.
00:305,000 persons in the last three months on average.
00:35And the claims for unemployment have been stabilizing or coming down.
00:41So the labor market seems like it's been stabilizing.
00:44On the inflation side, the other side of our mandate, inflation is running meaningfully
00:48above our target of 2%.
00:50The last reading for March of PC inflation was 3.2% for core and 3.5% for headline.
00:59Some of that is still the effect of tariffs playing through.
01:02Some of that is the energy price shock from the Middle East conflict.
01:07But there's also underlying inflation that we need to worry about as monetary policymakers.
01:12Inflation expectations have come up in the short-term.
01:17Long-term inflation expectations have been drifting up a little bit.
01:22So that's the summary of the economy.
01:24The risk going forward, in my view, the risks have been shifting.
01:30We have risks both on the employment side and on the inflation side.
01:34In my understanding, the risks have been shifting towards more risks on the inflation side than the employment side.
01:41In terms of monetary policy, which I guess is what you want to hear, my own views are that there
01:47are very plausible scenarios under which the economy would require us to keep the policy rate at its current level
01:56for some time.
01:58The current policy setting, when you adjust the federal funds rate for inflation, the real federal funds rate is around
02:06one-half of 1% or lower, and that is below what the committee believes is the long-term neutral
02:12rate, real neutral rate, which is 1%.
02:14So we are either neutral in real terms or slightly accommodative in real terms.
02:22That's my assessment.
02:24And I also see plausible scenarios under which the economy might require us to reduce the interest rate further.
02:31I see plausible scenarios under which the economy may require higher interest rates.
02:37So a lot of uncertainty right now.
02:40And it's important.
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