from these factors to ease over the course of this year, as the value of the dollar and crude oil prices stabilize, and i anticipate moderate economic growth, on balance, for this year as a whole. as always, however, the economic outlook is uncertain. notably, although the economic recovery in the euro area appears to have gained a firmer footing, the situation in greece remains unresolved. looking further ahead, i think that many of the fundamental factors underlying u. s. economic activity are solid and should lead to some pickup in the pace of economic growth in the coming years. in particular, i anticipate that employment will continue to expand and the unemployment rate will decline further. an improving job market should, in turn, help support a faster pace of household spending growth. additional jobs and potentially faster wage growth bolster household incomes, and lower energy prices mean consumers have more money to spend on other goods and services. in addition, growing employment and wages should make consumers more comfortable in spending a greater portion of their incomes than they have been in the aftermath of the great recession. moreover, increases in house values and stock market prices, along with reductions in debt in recent years, have pushed up households ’ net worth, which also should support more spending. finally, interest rates faced by borrowers remain low, reflecting the fomc ’ s highly accommodative monetary policies. indeed, recent encouraging data about retail sales and light motor vehicle purchases in the beginning of the second quarter could be an indication that the pace of consumer spending is picking up. another positive factor for the outlook is that the drag on economic growth in recent years from changes in federal fiscal policies appears to have waned. temporary fiscal stimulus measures supported economic output during the recession and early in the recovery, but those stimulus measures have since expired, and additional policy actions were taken to reduce the federal budget deficit. by 2011, these changes in fiscal policies were holding back economic growth. however, the effects of those fiscal policy actions now seem to be mostly behind us. 5 there are a couple of factors, however, that i expect could restrain economic growth. first, business owners and managers remain cautious and have not substantially increased their capital expenditures despite the solid fundamentals and brighter prospects for consumer spending. businesses are holding large amounts of cash on their balance sheets, which may suggest that greater risk aversion is playing a role. indeed, some economic analysis suggests that uncertainty about the strength of the recovery and

about government economic policies could be contributing to the restraint in business investment. 6 patrick russo ( 2015 ), “ the myth of first - quarter residual seasonality, ” liberty street economics ( blog ), federal reserve bank of new york, june 8. the congressional budget office estimates that current federal fiscal policies will have little effect on economic growth this year, but that earlier fiscal policy actions reduced the rate of real gdp growth roughly 11 / 2 percentage points in 2013 and about 1 / 4 percentage point in 2014 relative to what it would have been otherwise. see congressional budget office, the budget and economic outlook : 2015 to 2025 ( washington : cbo, january ), p. 32. a recent survey of this research is presented by nicholas bloom ( 2014 ), “ fluctuations in uncertainty, ” journal of economic perspectives, vol. 28 ( spring ), pp. 153 – 76. bis central bankers ’ speeches a second factor that could restrain economic growth regards housing. while national home prices have been rising for a few years and home sales have improved recently, residential construction has remained quite soft. many households still find it difficult to obtain mortgage credit, but, more generally, the weak job market and slow wage gains in recent years appear to have induced people to double - up on housing. for example, many young adults continue to live with their parents. population growth is creating a need for more housing, whether to rent or to own, and i do expect that continuing job and wage gains will encourage more people to form new households. nevertheless, activity in the housing sector seems likely to improve only gradually. regarding inflation, as i mentioned earlier, the recent effects of lower prices for crude oil and for imports on overall inflation are expected to wane during this year. combined with further tightening in labor and product markets, i expect inflation will move toward the fomc ’ s 2 percent objective over the next few years. importantly, a number of different surveys indicate that longer - term inflation expectations have remained stable even as recent readings on inflation have fallen. if inflation expectations had not remained stable, i would be more concerned because consumer and business expectations about inflation can become selffulfilling. implications for monetary policy my own outlook for the economy and inflation is broadly consistent with the central tendency of the projections submitted by fomc participants at the time of our june meeting. based on my outlook, i expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate