Alberto Musalem from the Fed comments on the economic situation and monetary policy in the United States. Here are the key takeaways from his remarks.
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Growth below potential poses risks to the labor market.
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Labor supply and demand have cooled simultaneously.
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Data integrity is critically important to the economy.
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Companies are using various strategies to adapt to tariffs, including cost-cutting and negotiating with suppliers.
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The Fed is currently trying to balance both sides of its mandate.
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The inflationary impact of tariffs is most likely to be short-lived.
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The labor market is balanced, but weaker economic activity poses risks to employment.
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There is a real probability of persistent inflation.
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Most of the impact of tariffs on inflation is likely to fade.
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Looking ahead, there is a risk that the Fed may miss both its inflation and employment targets, with particular concern for jobs.
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At present, the Fed is missing its inflation target but remains aligned with its employment mandate—the labor market is near full employment.
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Companies most reliant on imports are passing on costs, while those closer to the consumer are less likely to raise prices so far.
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Businesses are not yet resorting to layoffs to reduce costs.
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Companies are using various strategies to adapt to tariffs, including cost-cutting and supplier negotiations.
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Firms remain cautious about capital expenditures and hiring.
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Businesses continue to report a shortage of skilled labor.
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Bankers report that funding pressures have eased and credit quality is good.
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Economic activity appears stable—neither growing nor declining.
