Guynn Sees 34% Growth for 2004,
Stresses Long-Term Policy Goals
More balanced growth will likely continue in 2004 as labor markets gain strength, said Jack Guynn, president and chief executive officer of the Atlanta Fed.
Speaking to the Rotary Club of Atlanta, Guynn began his remarks with a look back at 2003, which he described as a “pivotal year when business spending joined with consumer spending to help lift the economy out of the doldrums.” Although last year’s economic performance was uneven, he said, “I think we have to be pretty pleased with the strength and the breadth of the economic expansion we had over the last half of the year.”
Looking ahead, Guynn said he’s comfortable with mainstream forecasts of 3.5 to 4 percent gross domestic product growth for 2004. He expects labor markets to strengthen while the pace of consumer spending could ease from late 2003 levels.
In his January address, Guynn noted the importance of interest rate-sensitive consumer spending in supporting the economy even as labor markets weakened. Low-cost borrowing has helped fuel consumer spending. But he expects to see consumers in 2004 be “more careful about adding to their debt.”
Business spending momentum likely will continue, Guynn said, citing stronger corporate revenues and technology spending. “I’m encouraged that businesses are stepping up their investments for the future, and I think it’s likely the new equipment that’s coming on line will require more people eventually to produce, install, manage, and operate it.”
Guynn also shared his views on monetary policy and explained the Fed’s aggressive efforts to ease policy in 200103 in response to short-term economic weaknesses. “The Fed’s mandate is to use monetary policy to help sustain long-term noninflationary economic growth, which in turn serves our other policy goals of job creation and an improved standard of living,” he said.
Guynn sees little threat that inflation is poised to rise significantly but noted the importance of looking to the long term in planning monetary policy. “If the economic expansion continues to build momentum and breadth, it will be appropriate at some point to bring policy back to a longer-run setting that is more consistent with noninflationary, sustainable growth.”
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