Philip N Jefferson: Economic outlook and energy effects
Speech by Mr Philip N Jefferson, Vice Chair of the Board of Governors of the Federal Reserve System, at the Global Perspectives Speaker Series, Federal Reserve Bank of Dallas, Dallas, Texas, 26 March 2026.
Thank you, Donald, for the kind introduction. I am honored to be here in Dallas. I very much enjoyed my time today meeting with community members and hearing from the hardworking staff at the Dallas Fed. And I appreciate this opportunity to speak with all of you this evening.
Tonight, I would like to share with you my updated economic outlook and then discuss the possible implications of that outlook for the path of monetary policy. It is an opportune time for that discussion, just a week after our last Federal Open Market Committee meeting. Then, I will expand on the implications of elevated energy prices for the economy, particularly thinking about the effects here in the resource-rich 11th District, and finally I will be happy to answer some questions.
I see the U.S. economy continuing to grow, led by resilient consumers and healthy business investment. The labor market is roughly in balance but susceptible to adverse shocks. Unemployment is low and stable by historical standards, while hiring has slowed to a very modest pace. Inflation, meanwhile, remains above the Federal Reserve's 2 percent target. At the beginning of the year, I noted signs that inflation would return to a sustainable path toward our objective. The ongoing uncertainty over tariff policy and the recent jump in energy prices, however, complicates, at least in the short term, the picture on both sides of our dual mandate of maximum employment and price stability.
Economic Activity
In 2025, gross domestic product expanded about 2 percent, as shown in Figure 1. That was just a slight slowdown from the prior year, and about in line with estimates of its potential pace. Economic activity was supported by household spending. Business investment, particularly in equipment and intellectual property, was also strong over the past year. Residential investment, meanwhile, contracted.