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The Atlanta Fed


Guynn Says Economy Positioned for Solid Growth in 2005

For immediate release: January 10, 2005

GUYNN SAYS ECONOMY POSITIONED FOR SOLID GROWTH IN 2005

ATLANTA – Strong economic growth should continue in 2005, but policymakers must confront emerging challenges in order to sustain the U.S. economic expansion for the long term, said Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta.

Speaking to the Rotary Club of Atlanta, Guynn described 2004 as a very solid year, citing improved labor markets, strong business spending growth and continuing low inflation. He noted that gross domestic product growth for the past six quarters had improved to approximately 4.5 percent, about the same rate on average as in the late 1990s.

With this momentum, the economy in 2005 is positioned to continue solid growth, Guynn said. Businesses have high levels of liquidity and seem poised to continue spending growth, in turn helping to sustain further employment growth.

Guynn said inflation has been well contained, but he noted that most price data are backward looking. “Although I do not think a significant pickup in inflation is imminent, I continue to be struck by talk of price increases that my business contacts say they are planning as the economy expands,” he said, citing a list of factors related to pricing and inflation expectations that he will be watching closely in the coming months.

As part of his remarks Guynn discussed the United States’ current account and fiscal deficits. “In 2005, our fiscal policymakers have an excellent chance to strengthen the nation’s economic foundations by demonstrating a renewed commitment to reducing the federal budget deficit,” he added.

He also discussed energy prices and the Federal Reserve’s monetary policy stance. “The movement back toward a more neutral interest rate environment should contribute to a more sustainable and balanced economic environment. I might describe our recent policy actions as a form of preventive maintenance that helps to ensure low inflation in the future while facilitating a transition toward other desirable outcomes such as less borrowing and more saving.”

A transcript of Jack Guynn’s remarks is available on the Atlanta Fed Web site at www.frbatlanta.org.

The Federal Reserve Bank of Atlanta serves the Sixth Federal Reserve District, which encompasses Alabama, Florida, Georgia and parts of Louisiana, Mississippi and Tennessee. As part of the nation’s central banking system, the Atlanta Fed participates in setting national monetary policy, supervises numerous commercial banks and provides a variety of financial services to depository institutions and the U.S. government.

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