Guynn Expects Solid Growth in 2005; Stresses Importance of Low Inflation

For immediate release: Feb. 23, 2005

BIRMINGHAM, ALA. – With economic growth continuing at a solid pace, Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta, said today 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.”

Guynn said in a speech to the Rotary Club of Birmingham that he expects the U.S. economy to post gross domestic product growth in the 3 to 4 percent range this year. He also anticipates strong business spending, continuing low inflation, steady employment gains and a decline in the 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 said that he 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. Guynn stressed the importance of preserving a low-inflation environment where “businesses are able to make decisions without worrying about rising and unstable prices that can erode business confidence and distort investment decisions.” While the FOMC has raised the federal funds rate six times since June of last year, Guynn said he believes that the rate remains accommodative and that “the FOMC still has a ways to go in recalibrating monetary policy.”

A transcript of Guynn’s remarks is available on the Atlanta Fed Web site.

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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Contact: Jean Tate 404-498-8035