Megan Leonhardt
New York Federal Reserve President John Williams on Friday warned that the only certainty about the future of U.S. economy right now is that it's uncertain, though he suspects lower economic growth is more likely this year. Trade policy may play a role in that, but there are other factors he believes will be bigger drivers in weighing down momentum.
In prepared remarks at the Macroeconometric Caribbean Conference in the Bahamas on Friday, Williams said that the latest forecasts of real gross domestic product growth published in the latest Summary of Economic Projections seemed "completely plausible" to him. For reference, officials revised down their initial median forecast for real GDP growth in 2025 to 1.7% from 2.1% in December's SEP. The majority of the estimates from policymakers was a range of growth of 1.5% to 2%.
But Williams said that he expects slower GDP growth due to a slowdown in labor-force growth due to lower immigration rates. Goldman Sachs' economists recently estimated that net immigration into the U.S. will fall to 500,000 by the end of 2025. They found that total annualized net immigration fell to 700,000 in February from 1.7 million in December.
"Uncertainty is high, and there are many scenarios that could play out, depending on fiscal and trade policies, and geopolitical and other developments," Williams added. In fact, he spent a good portion of his remarks noting the high levels of uncertainty in the economic conditions and outlook currently.
"After 30 years in central banking, I can unequivocally say: Uncertainty is the only certainty in monetary policy," Williams said Friday. The economy entered this year on "firm footing," he said, but he's wary about the future.
"In these circumstances, it will be important to take a holistic view in monitoring and assessing all available information. It is also fitting to take a risk-management perspective in assessing the economic outlook, in evaluating the appropriate stance of monetary policy, and in making policy decisions," Williams said.
Recent economic data -- both hard and soft -- are sending "mixed signals, " Williams acknowledged. This differed slightly from Fed Chair Jerome Powell's remarks on Wednesday, when he noted that only so-called soft sentiment data was showing real declines. But both Williams and Powell seemed to agree that while short-term inflation expectations had moved up, the longer-term readings were broadly holding up.
"While year-ahead inflation expectations of firms also moved up, their longer-term expectations remained stable," Williams said, adding that medium- and longer-run expectations are well anchored.
With this in mind, and the general uncertainty about how fiscal and monetary policy will evolve, Williams reiterated that he believes the current, modestly restrictive stance of monetary policy is "entirely appropriate," and well-positioned to adjust to changing circumstances.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
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March 21, 2025 09:50 ET (13:50 GMT)
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