ECB's Nagel: German economy may stagnate or contract a little in 2025

Over the course of this year, the U.S. economy has shown resilience in a context of sweeping changes in economic policy. In terms of the Fed's dual-mandate goals, the labor market remains near maximum employment, and inflation, though still somewhat elevated, has come down a great deal from its post-pandemic highs. At the same time, the balance of risks appears to be shifting. In my remarks today, I will first address the current economic situation and the near-term outlook for monetary policy. I will then turn to the results of our second public review of our monetary policy framework, as captured in the revised Statement on Longer-Run Goals and Monetary Policy Strategy that we released today. Current Economic Conditions and Near-Term Outlook When I appeared at this podium one year ago, the economy was at an inflection point. Our policy rate had stood at 5-1/4 to 5-1/2 percent for more than a year. That restrictive policy stance was appropriate to help bring down inflation and to foster a sustainable balance between aggregate demand and supply. Inflation had moved much closer to our objective, and the labor market had cooled from its formerly overheated state. Upside risks to inflation had diminished. But the unemployment rate had increased by almost a full percentage point, a development that historically has not occurred outside of recessions. Over the subsequent three Federal Open Market Committee (FOMC) meetings, we recalibrated our policy stance, setting the stage for the labor market to remain in balance near maximum employment over the past year (figure 1). *POWELL: SHIFTING BALANCE OF RISKS MAY WARRANT ADJUSTING POLICY *POWELL: SITUATION SUGGESTS DOWNSIDE RISKS TO EMPLOYMENT RISING ?*POWELL: WON'T ALLOW ONE-TIME INCREASE TO BECOME ONGOING PROBLEM *POWELL: LABOR-MARKET STABILITY ALLOWS US TO PROCEED CAREFULLY *POWELL: LABOR SUPPLY HAS SOFTENED IN LINE WITH DEMAND *POWELL: SHORT-LIVED TARIFF PRICE EFFECTS A REASONABLE BASE CASE The highlights from Powell's speech pic.twitter.com/UPRNAZzV85