Financial Update (First Quarter 2005)


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Atlanta Fed President Expects Solid Economic Growth, Stresses Importance of Low Inflation

Jack Guynn

With economic growth continuing at a solid pace, Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta, said in a speech in late February that the Federal Reserve must remain watchful for unwelcome inflationary pressures. But he emphasized his own comfort level with the Federal Open Market Committee’s (FOMC) current monetary policy stance: “In my view, the policy path we’ve been on has helped to restrain inflationary pressures—at least for now.”

Conditions for growth in place
Addressing the Rotary Club of Birmingham, Ala., Guynn said that he expects the U.S. economy to post gross domestic product growth in the 3–4 percent range this year. He also foresees strong business spending, continuing low inflation, steady employment gains, and a declining unemployment rate. Guynn also cited several factors that bear watching: energy prices, the nation’s fiscal deficits, and the bottlenecks and imbalances that can develop in an expanding economy.

In his discussions with business leaders, Guynn has heard anecdotal reports of price increases for some transportation services and input costs for production, rising health care costs, and wage pressures for some higher-skilled and professional workers. He stressed the importance of preserving a low-inflation environment in which “businesses are able to make decisions without worrying about rising and unstable prices that can erode business confidence and distort investment decisions.”

Guynn’s Speech

Guynn’s Biography

Keeping a close eye on policy
While the FOMC has raised the federal funds rate six times since June 2004, Guynn believes that the rate remains accommodative and that “the FOMC still has a ways to go in recalibrating monetary policy.” In closing, Guynn suggested that “we appreciate and enjoy low and stable inflation for what it is: the foundation supporting economic growth.”