Introduction

Thank you for the introduction. I am looking forward to our conversation, Professor Rajan. First, I will briefly discuss the outlook for the economy and monetary policy.

Economic Overview

At the Fed, we focus on our dual-mandate goals given by Congress: maximum employment and stable prices. Despite heightened uncertainty and downside risks, the U.S. economy remains solid. The labor market is at or near maximum employment, while inflation, though reduced, is slightly above our 2% objective.

Recent Economic Data

In a couple of weeks, we will receive the initial reading on first-quarter GDP. Current data suggest growth has slowed compared to last year’s robust performance. Overall consumer spending appears to have grown modestly despite strong motor vehicle sales. Additionally, strong imports in the first quarter, reflecting businesses’ efforts to prepare for potential tariffs, are expected to negatively impact GDP growth.

Surveys from households and businesses show a sharp decline in sentiment due to trade policy concerns. External forecasts for the full year indicate continued, although positive, growth. We are closely monitoring incoming data as households and businesses process these developments.

In the labor market, nonfarm payrolls grew by an average of 150,000 jobs per month in the first quarter. Although job growth has slowed relative to last year, low layoffs and diminishing labor force growth have maintained a stable and low unemployment rate. The job openings-to-unemployed ratio remains slightly above 1, near pre-pandemic levels. Wage growth is moderating yet continues to outpace inflation, indicating a balanced labor market without significant inflationary pressure.

Price Stability

For our price-stability mandate, inflation has eased considerably from pandemic highs without causing significant unemployment. Progress on inflation continues gradually, with recent readings still above our 2% target. Estimates from last week indicate that total PCE prices rose 2.3% over the 12 months ending in March, and core PCE prices rose 2.6% excluding food and energy.

Policy Changes

Looking ahead, the new Administration is implementing substantial policy changes in trade, immigration, fiscal policy, and regulation. These evolving policies’ effects on the economy remain uncertain. So far, tariff increases are larger than expected, likely causing higher inflation and slower growth. Near-term inflation expectations have risen significantly, influenced by tariffs; however, longer-term expectations remain anchored, with market-based measures close to 2%.

Monetary Policy

As we gain clarity on policy changes, we will better understand their implications for the economy and monetary policy. The expected inflationary effects of tariffs may be temporary or persistent. Our aim is to ensure long-term inflation expectations remain anchored and prevent a one-time price level increase from evolving into an ongoing inflation issue. We will balance our dual-mandate goals, considering the economy’s distance from each objective and their respective time horizons.

Conclusion

As the great Chicagoan Ferris Bueller noted, “Life moves pretty fast.” For now, we are positioned to await greater clarity before making policy adjustments. We will continue analyzing incoming data, the evolving outlook, and associated risks, recognizing that high unemployment or inflation can adversely affect communities and businesses. Our commitment is to achieve maximum employment and price stability.

Thank you. I look forward to your questions.