As we look to broader trends, gross domestic product (GDP) growth has been restrained in recent years by a variety of forces depressing both supply and demand, including slow labor force and productivity growth, weak growth abroad, and lingering headwinds from the financial crisis.
Although I am cautiously optimistic that some of these forces will abate over time, I anticipate that they will continue to restrain overall growth over the medium term, likely holding down the level of interest rates consistent with stable labor market conditions. Turning to inflation, we are now much closer to the FOMC’s 2 percent objective than we were just a year ago.