Philip N Jefferson: US economic outlook and monetary policy

Speech by Mr Philip N Jefferson, Vice Chair of the Board of Governors of the Federal Reserve System, at the Economics Department Special Lecture, Lafayette College, Easton, Pennsylvania, 5 February 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Figures accompanying the speech 

Thank you, Professor Smith. It is an honor to be speaking to you today here at Lafayette College. I am glad to have the opportunity to return to such a historically important place as Easton, Pennsylvania, and the Lehigh Valley. This area was part of this country's colonial beginnings, it was instrumental in the rising of the industrial age, and, as the home to Crayola, it very literally played a role in coloring how we see the world. Today, this region is leading the way forward with its many outstanding institutions of higher education, very prominently including, of course, Lafayette College.

Today, I would like to take this opportunity to share with you my outlook for the U.S. economy and my views of appropriate monetary policy. This is a useful time to do that, as my colleagues and I on the Federal Open Market Committee (FOMC), the Federal Reserve's primary monetary policymaking body, held our first meeting of 2025 just last week.

Overall, the U.S. economy is starting the year in a good position. I expect inflation's slow descent to continue, and I anticipate that economic growth and labor market conditions will remain solid. I have learned, however, that it is wise to be humble about my projections. There is always a great deal of uncertainty around any economic forecast, and currently we face additional uncertainties about the exact shape of government policies, as well as their economic implications.

Last week, my FOMC colleagues and I discussed the latest economic developments and reviewed data that arrived since our previous policy meeting in December. At the conclusion of that meeting, I voted in support of the Committee's decision to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. This decision was made in support of our goals to achieve maximum employment and inflation at the rate of 2 percent over the longer run. I remain focused on setting policy to achieve the dual-mandate goals given to us by Congress: maximum employment and stable prices. Sound monetary policy and positive supply-side developments have contributed to the achievement of sustained economic growth in recent years, the return of low unemployment, and inflation moving sustainably toward our 2 percent objective. I remain committed to returning inflation to our target while sustaining the solid labor market. Now is an appropriate time to assess the path forward for the economy. I am happy to be here today to share my views with you.