Financial Update (Second Quarter 2006)


FEATURES

 Guynn Notes
 Growth, Some
 Uncertainties

 Conference Explores
 Markets, Institutions

 Economists Propose
 Fannie, Freddie
 Portfolio Limits

 Kohn Nominated
 as Fed’s
 Vice Chairman

 Atlanta Fed 2005
 Annual Report
 Remembers Katrina

 Fed Announces
 Changes to Cash
 Inventory Services

 Agencies Issue
 Advisory About Flu
 Pandemic

 Exploring Credit,
 Debit Cards’
 Payment Process

 Atlanta Fed to
 Maintain Presence
 in Birmingham

 Barron: Community
 Banks Face
 Challenges,
 Opportunities

 Fed Gov. Olson
 Addresses Importance
 of Banks

 Board Launches
 Web Site
 Geared to Kids

 New Fed Product
 Helps Mitigate
 ACH Risk

 FDIC Ups Insurance
 Limits on Some
 Accounts

DEPARTMENTS

  Data Bank

  Circular Letters

 STAFF

 SUBSCRIBE ONLINE

Guynn Sees Solid Economic Growth, Notes Uncertainties Ahead

Jack Guynn
 

In a speech to the Rotary Club of Nashville in May, Federal Reserve Bank of Atlanta President and Chief Executive Officer Jack Guynn noted the economy’s strong performance in the first quarter of 2006, adding that he expects gross domestic product (GDP) to continue its growth and inflation and inflation expectations to remain in check. But, he added, there are also “significant uncertainties that could shape our economic outlook and help to inform how Fed policy should evolve.”

Housing markets, energy costs are key
One of the risks to the outlook, Guynn said, is housing. “In recent months, there is growing evidence of a cooling in many markets across the country,” he said. Although strong fundamental factors support continued housing growth, he said “the market is changing, and the impact of the housing adjustment on overall economic activity is not yet fully evident.” Guynn added that persistently higher energy costs are another risk that induces reallocation of spending and adds to cost pressures.

Related
Text of speech
Jack Guynn’s bio

In discussing inflation, Guynn distinguished between core measures of inflation, excluding volatile food and energy costs, and so-called headline measures of the consumer price index. “While these [core] measures are still relatively low, I don’t want to see inflation move measurably higher,” Guynn said.

Economy’s behavior will determine monetary policy
Regarding monetary policy, Guynn said that he believes output growth will settle to a rate somewhat below the growth seen in the first quarter of 2006. “I believe that monetary policy adjustments that have already been made, along with other factors such as continuing productivity improvements, should help to contain elevated inflation pressures,” he said.

Fed policy is at a point that “requires careful analysis of new economic data, especially data that might signal an uptick of inflation or increase in inflation expectations that would affect our likely course for the economy.... Given the range of possibilities ahead, I believe this is not a time for the Fed to precommit to a particular course of policy,” Guynn said.

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