Speech by Governor Waller on the economic outlook

Navigating Uncertainty: A Look at the Current Economic Landscape

The U.S. economic landscape presents a mixed picture: a resilient real economy, yet persistent inflation challenges. While household and business spending remain robust,inflationary pressures have shown uneven progress,prompting cautious optimism from policymakers.

Inflation remains a Key Concern

Despite two months of promising inflation data in November and December, January brought a disappointing rebound. As one Federal Reserve official noted, “January once again disappointed and showed that progress on inflation remains uneven.”

“If this winter-time lull in progress is temporary, as it was last year, then further policy easing will be appropriate. But until that is clear, I favor holding the policy rate steady.”

This cautious approach mirrors the experience of early 2024, when a similar January spike in inflation prompted careful observation and ultimately a continuation of policy tightening later in the year. The key question now is weather a similar pattern will unfold in 2025.

Labor Market Strength Provides Support

One encouraging factor is the strong labor market, which has defied predictions of a slowdown. Revisions to 2024 employment data further solidify this view. The robust labor market is expected to provide continued support for consumer spending, a major driver of economic growth.

Policy Decisions Amidst Uncertainty

Recent economic events, including the banking sector stresses in March 2023, have highlighted the need for policymakers to act decisively, even in the face of uncertainty. The Federal Reserve, in collaboration with other government agencies, successfully addressed these challenges while continuing its efforts to combat inflation.

“The moral of this story is that monetary policy cannot be put on hold waiting for these types of uncertainty to resolve,”

Outlook for Economic Growth

Current economic indicators point to continued growth in the near term,although the pace may moderate somewhat.Business sentiment is positive, with manufacturing activity showing signs of expansion. Consumer spending, fueled by a strong labor market, is expected to remain a key driver of growth.

Looking Ahead

While the economic outlook remains positive, policymakers and businesses alike must remain vigilant about inflation and its potential impact.A balanced approach, combining supportive monetary policy with responsible fiscal measures, will be essential to navigating the current economic landscape and fostering sustainable growth.

What single factor will have the most significant impact on the U.S. economy in the next two years?

Navigating Uncertainty: A Look at the Current Economic Landscape

With a resilient real economy and robust spending, the U.S. economy presents a mixed picture as inflationary pressures persist. amidst cautious optimism from policymakers, we delve into the key aspects shaping this economic landscape, speaking with Dr. Evelyn Harper,renowned economist and professor at Georgetown University.

Inflation: A Persistent Challenge

After a brief respite in late 2024, inflation rebounded in January 2025. Dr. Harper, what are yoru thoughts on the uneven progress against inflation?

“Inflation’s uneven trajectory suggests we’re not out of the woods yet. It’s crucial to remain vigilant and disciplined in our policy approach.” – Dr. Evelyn Harper

Considering the January spike, should the Federal Reserve maintain its cautious stance?

Labor market Resilience

Despite expectations, the labor market has remained robust. what accounts for this unexpected strength, Dr. Harper?

“The strong labor market is a beacon of resilience. Yet, it’s a two-edged sword – while it supports consumer spending, it could also prolong wage-driven inflation.” – Dr. Evelyn Harper

Policy Decisions in Uncertain Times

Considering the March 2023 banking sector stresses,how have policymakers responded to uncertainty,and what lessons can be drawn for today?

“Monetary policy must balance multiple needs – managing inflation,promoting growth,and mitigating risks. It’s a complex dance,and policymakers must stay agile.” – Dr. Evelyn Harper

Growth Prospects and Inflation Vigilance

Given the positive indicators, what’s your outlook for economic growth, Dr. Harper? How can businesses and policymakers prepare for potential inflation surprises?

“The economy is expected to grow, but at a potentially moderated pace. The key is not to let our guard down on inflation. Businesses and policymakers should prioritize versatility and preparedness in their strategies.” – Dr. Evelyn Harper

Now that we’ve explored the current landscape, it’s time to look ahead. In your opinion, what single factor will have the most significant impact on the U.S. economy in the next two years?

“the battleground will be inflation.Policymakers and businesses must remain laser-focused on this challenge as we navigate the economic terrain ahead.” – Dr. evelyn Harper

Thank you, Dr. Harper, for sharing your insights. staying informed and prepared will indeed be key to navigating the uncertainty and fostering sustainable growth.