Financial Update (January-March 2001)
Atlanta Fed President Expects Moderating Growth in 2001
he U.S. economy will continue to expand in 2001, but growth will be more moderate than in the last several years, according to Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta, speaking to the Atlanta Rotary Club in early January.
“In the long term,” Guynn said, “I think the moderation of growth that we’ll witness in 2001 will be a mostly healthy thing. It will help the economy avoid some serious imbalances that might otherwise have begun to accumulate, and it will help ensure that growth remains sustainable.”
On the demand side of the economy, Guynn noted that consumer spending will likely slow somewhat over the short term, but the good news is that unemployment is low and wage growth remains very healthy.
On the supply side of the economy, Guynn underscored the Federal Open Market Committee’s (FOMC) statement of Jan. 3 that “there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating.” Although productivity is not likely to grow at the rates witnessed in recent years, Guynn believes that businesses should still be willing and able to make the capital investments they need to increase productivity in 2001.
In closing, Guynn said that while inflation expectations remain under control, the great challenge for this year may be inflated expectations. In this regard, he offered a reminder: “Slower gross domestic product (GDP) growth is not the same thing as no growth; a slightly higher unemployment rate is not the same thing as high unemployment; and a very modest uptick in measured inflation does not signal a return to accelerating inflation. Businesses, consumers — and, yes, even policymakers — should not allow inflated expectations to distort their thinking.”
For the complete text of Guynn’s speech, click here.