Atlanta Fed President Guynn Expects Moderately Slower Growth for the Nation in 1999

Embargoed until 1 p.m. EST, Jan. 4, 1999

ATLANTA The U.S. economy will feature slower but continued growth in 1999 as the nation prepares to enter into its ninth year of economic expansion, said Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta. Speaking before the Atlanta Rotary Club today, Guynn said that while 1999 may not be as exceptional as the banner years of 1997 and 1998, the year will produce "a very good showing all the same."

Overall economic output as measured by gross domestic product should grow by close to 2.5 percent on an average annual basis in 1999, he said, down from around 3.5 percent in 1998. Inflation as measured by the consumer price index should increase slightly to 2 percent, and the unemployment rate should average a little more than 4.5 percent, he continued. In discussing consumer spending and business investment, Guynn said he expects growth in both areas to moderate but remain strong in 1999.

While touting the U.S. economy's three fundamental strengths ? its balance, strong consumer and business spending momentum, and prudent fiscal and monetary policies ? Guynn cited the Asian economic situation as a potential caveat for the 1999 outlook. "If Japan doesn't move toward recovery and if the Asian malaise spreads to Latin America, all bets are off," he said. "This is a remote possibility, to be sure, but a possibility all the same."

In closing, Guynn said that he is increasingly concerned about "the institutionalization of unrealistic expectations." After several years of extraordinary economic performance, Americans may begin to confuse slower GDP growth with slow GDP growth and slightly higher inflation with accelerating inflation. These are not the same thing, Guynn cautioned, and "consumers, businesses, investors and policymakers should not proceed as though they were. Such a delusion could have real repercussions for the U.S. economy."

Text of delivered speech

Contact: Jean Tate 404-498-8035