Trade and tariffs: The impact on consumers

Thank you, Athanasios, and thank you for the opportunity to be part of this very worthy celebration. In support of the theme of this conference, I do have some thoughts on the Shadow Open Market Committee's contributions to the policy debate, in particular its advocacy for policy rules. But before I get to that, I am going to exercise the keynote speaker's freedom to talk about whatever I want. To that end, I want to take a few minutes to offer my views on the economic outlook and its implications for monetary policy. So let me start there, and afterward I will discuss the role that policy rules play in my decision making and in the deliberations of the Federal Open Market Committee (FOMC). In the three weeks or so since the most recent FOMC meeting, data we have received has been uneven, as it sometimes has been over the past year. I continue to judge that the U.S. economy is on a solid footing, with employment near the FOMC's maximum employment objective and inflation in the vicinity of our target, even though the latest inflation data was disappointing. Real gross domestic product (GDP) grew at a 2.2 percent annual rate in the first half of 2024, and I expect it to grow a bit faster in the third quarter. The Blue Chip consensus of private sector forecasters predicts 2.3 percent, while the Atlanta Fed's GDPNow model, based on up-to-the moment data, is predicting real growth of 3.2 percent. Earlier, there were concerns that GDP in the first half of this year was overstating the strength of the economy, since gross domestic income (GDI) was estimated to have grown a mere 1.3 percent in the first half of this year, suggesting a big downward revision to GDP was coming. But revisions received after our most recent FOMC meeting showed the opposite—GDI growth was revised up substantially to 3.2 percent. This change in turn led to an upward revision in the personal saving rate of about 2 percentage points in the second quarter, leaving it at 5.2 percent in June. This revision suggests that household resources for future consumption are actually in good shape, although data and anecdotal evidence suggests lower-income groups are struggling. These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdo post: *FED'S WALLER: SHOULD PROCEED WITH MORE CAUTION ON PACE OF CUTS *WALLER: DATA WARRANT MOVING TO NEUTRAL AT `DELIBERATE PACE' *WALLER: 'CONSIDERABLE' ROOM FOR CUTTING ABOVE NEUTRAL RATE *WALLER: HURRICANES, STRIKE COULD REDUCE OCT. PAYROLLS BY 100K post: FED'S WALLER: MY BASELINE CALLS FOR REDUCING POLICY RATE GRADUALLY OVER THE NEXT YEAR. post: FED'S WALLER: THE LATEST INFLATION DATA DISAPPOINTING. post: WALLER: IF, IN A LESS LIKELY CASE, INFLATION FALLS BELOW 2% OR LABOR MARKET DETERIORATES, FED CAN FRONT-LOAD RATE CUTS