speeches · May 10, 2005

Speech

William Poole · President

The Economic Outlook AAIMManagementAssociation St.Louis,Missouri May11,2005 Iam pleased to be here today to discuss ReserveSystem.Iespeciallyappreciateassistance the economic outlook for the nation. providedbyKevinKliesen,associateeconomist There are always issues of one sort or intheResearchDivisionoftheSt.LouisFed. another, and today is no different. Still, However,Iretainfullresponsibilityforerrors. although I’ll discuss these issues, it is worth reminding ourselves just how sound the U.S. economy is. In short, life is good for most EMPLOYMENT AND OUTPUT Americans and the nation has done a fine job in Overthepastfewweeks,governmentstatisti- seizing opportunities. The fact that we have calagenciesandprivate-sectororganizations issues to discuss is a consequence of how ambi- havereleasedseveralkeyeconomicreports. tious we are. We know that our nation always has further opportunities to exploit, improve- Recentdatapoundhomeanimportantlesson. ments to make and problems to solve. My point High-frequencydata,suchasmonthlyreports, is simply that in discussing problems we not tendtobevariableandsubjecttorevision.Before lose sight of what we have and why we have it. lastFriday’semploymentreport,thefinancial Withregardtolonger-runissues,perhaps presswasfullofarticlesontheprospectsfora theirkeyunifyingfeatureisthattheyarisefrom softpatchintheeconomy.Thelargeincreasein thechangingdemographicsituationintheUnited employmentinAprilreportedonFriday,and Statesandtherestoftheworld.Demandson upwardrevisionsofemploymentdatafor governmentfromouragingpopulation,centered FebruaryandMarch,dispelledmuchofthesoft- on,butnotconfinedto,SocialSecurityand patchtalk.WhileItalkaboutrecentdata,how- Medicareareatthetopoftheagenda.Although ever,keepinmindthat,asoneofmyeconomist notthewholestory,thesespendingpressures friendsputit,becauseofdatarevisionseconomic havemuchtodowiththefederalbudgetdeficit historyisneverquitewhatsheusedtobe. andprospectsforfuturedeficits.Itwouldbeeasy Toemphasizehowimportantitistoexamine toexpandthelistoflonger-runissues,butdoing statisticalreportsclosely,notethatevenrevisions sowouldmakeimpossibleadiscussionofthe mustbeexaminedclosely.ConsidertheApril topicfortoday—theU.S.economicoutlookover employmentreport.Seasonallyadjustedemploy- thenextfewyears. mentforMarchwasrevisedupby93,000,asig- Themajorissuesintheeconomicoutlook, nificantnumberofjobs.Buttheseasonally muchinthenewsinrecentweeks,concern unadjustedcountwasrevisedupbyonly50,000 prospectsforinflationandthepossibilityofa slowdownineconomicgrowth.I’lltakeupthe jobs—stillsignificantbutmanyfewerthan93,000. growthsituationfirst,andthenturntoinflation. Thus,revisionofseasonalfactorsaccountedfor Beforeproceeding,Iwanttoemphasizethat 43,000ofthetotalrevisionof93,000inthesea- theviewsIexpressherearemineanddonot sonallyadjustedjobcount.Revisionsofseasonal necessarilyreflectofficialpositionsoftheFederal factorsarenotfundamental,butmerelychange 1 ECONOMICOUTLOOK howemploymentgainsaredistributedacross ofgrowth.Thesereadingsonmanufacturingare themonthsoftheyear. consistentwiththeApriljobsreport,which Thelesson,bytheway,isnotthatthedata showedthatmanufacturingjobsactuallydeclined aremisleadingbutinsteadthattheymustbe by6,000despitethestrongoveralljobsgrowth interpretedwithdueregardtothestatistical of274,000. processesbehindtheirconstruction.Current Onthenon-manufacturingside,theISM’s estimatespublishedbythestatisticalagencies Aprilbusinessactivityindexalsoedgeddown representthebestestimatesourfirst-classpro- modestlyfromMarch’slevel,butwasslightly fessionalstatisticianscansupply.Agencypub- strongerthanexpected.Moreover,thereport licationsprovideampleinformationonthe indicatescontinuedstronggrowthintheservices statisticalpropertiesoftheseestimates,andwe sectoroftheeconomy,whichismuchlargerthan ignorethosepropertiesatourperil. thegoodsproducingsectors. Thefloodofnewscontinuedwiththismorn- Fromaforecastingperspective,perhapsthe ing’sreportoninternationaltradeinMarch,which mostimportantoftherecentdatareleaseswas I’venotyethadachancetodigest.Tomorrow indeedtheemploymentreportforApril.Based we’lllearnhowsalesatthenation’sretailers onthisreport—atotalseasonally-adjustedjobs faredinApril.Theretailsalesreportisfollowed gainof274,000—itappearsthateconomiccon- withgreatinterest,butIalwaysissueawordof ditionsimproveddramaticallyinApril.Inaddi- specialwarningonthisreport.Thereportthat tion,growthofaggregatehourswasthestrongest willgetalltheattentionistheAdvanceReport inmorethaneightyears,whileaveragehourly onRetailSales,whichtendstobevolatileandis earningsadvancedatalmosta4percentrate. oftenrevisedsubstantially.Analystsshouldpay Together,thesenumbersimplyconsiderable almostasmuchattentiontotherevisionsofprior growthinpersonalincomeinApril. advancereportsastheydototheinitialestimate. Otherimportantreportsreleasedrecently Thatsaid,indicationsareretailsalesposteda includefirst-quarterestimatesofrealGDP,employ- sizablegaininApril—evenwhenlastmonth’s mentcostsandproductivity,oroutputperhour impressiveautosalesareexcluded. oflaborinput.Atthebeginningofeverymonth Asmanyanalystshavecommented,someof theInstituteforSupplyManagement(ISM) thelatestdataaresuggestiveofaneconomicsoft releasesitsreportsformanufacturingandnon- patch.Idonotdisagreewiththisinterpretation, manufacturing,andsowenowhavethosereports butemphasizethatthereissomuchnoisein forApril.TheISMmanufacturingreportisapar- monthlydatathatitisunwisetodramatically ticularlyvaluableindicatorofeconomicactivity altereconomicforecastsforthisyearandnext. inthemanufacturingsector. ThelatestBlueChipforecastfor2005is3.4per- AsmeasuredbytheISM’sdiffusionindex, centrealgrowth,measuredintermsoftheentire thepaceofmanufacturingactivityslowedalittle yearcomparedto2004,andalso3.3percent morethanexpectedinApril,asboththeindex growthfor2006comparedto2005.Admittedly, ofnewordersandorderbacklogsdippedand thesearemodestlybelowlastmonth’sBlueChip firmsreportedlyparedtheirinventorystocks. forecasts,whichwerefor3.7and3.4percentfor Ofnote,theISMreportranabitcountertothe 2005and2006,respectively.Theseforecasts toneofthelatestBeigeBookreport,whichnoted probablyreflecttheweaker-than-expectedfirst- “largelypositive”readingsfrommostDistricts, quarterGDPreport,butIwouldnotbeatallsur- andtoafewothersurveysofthemanufacturing prisediftheyweremarkedupinresponsetothe sectorreleasedinApril.Nonetheless,theFed’s strongApriljobsreport.Inanyevent,theforecasts monthlyindustrialproductionreportforMarch arebelowlastyear’s4.4percentgrowth,asshould suggestthatgrowthofmanufacturingoutputhas beexpectedastheeconomyabsorbsitsmargin retreatedmodestly,albeitfromratherhighrates ofunderutilizedlaborandcapitalresources. 2 TheEconomicOutlook NowI’llturntorecentGDPdata.Thebroadest onlyincreasedatabouta5percentrateinthefirst measureofeconomicconditionsisthenation’s quarter.Giventhatmanyforecasterscontinueto grossdomesticproduct.Acoupleofweeksago, expectrelativelystronggrowthinbusinesscapital theBureauofEconomicAnalysis(BEA)pegged fortheremainderof2005,andeveninto2006,it first-quarterrealGDPgrowthat3.1percent,which maybethecasethatsomeoftherapidgrowthof wasaboutthree-quartersofapercentagepoint businessinvestmentin2004reflectedtheefforts belowboththeAprilBlueChipConsensusfore- offirmstotakeadvantageofthebusinessinvest- castandtheeconomy’sgrowthregisteredinthe menttaxincentivesthatexpiredonthelastday fourthquarterof2004.Thisfirst-quarterreport of2004.Ifso,thenthefirst-quarterinvestment wastheBEA’s“advance”estimate,whichisbased lullmayhavemerelyreflectedthefactthatsome onincompletedata.Amongotheritems,theBEA firmsdecidedtomoveforwardinto2004some lackssolidestimatesofexports,imports,and ofthecapitalexpendituresthatotherwisewould businessinventoriesforthelastmonthofthe haveoccurredinearly2005. quarterwhentheadvanceestimateisreleased. Partiallyoffsettingthecapital-spendingslow- TheBEAprojectsthemissingdatausingpast downinthefirstquarterwasamodestincrease dataandsomejudgment. inthegrowthofhousingconstruction.Forsome Asthemissingsourcedatatricklein,andthe timenow,theresiliencyoftheU.S.housing existingsourcedatagetrevised,theBEAwill industryhassurprisedmanyintheforecasting reviseitsestimateoffirst-quarterrealGDP;it community.Indeed,Marchconstructionspending willpublishthefirstrevision,whichitcallsthe rosebymorethanexpected.Althoughhousing “preliminary”estimateonThursday,May26.I issusceptibletolong-termdemographictrends havenoreasontobelievethattherevisionwill suchasadecliningnumberofnewhousehold beeitherupordown. familyformations,forpurposesofdiscussing TheadvanceGDPreportforthefirstquarter theshort-termoutlookmovementsinmortgage hadseveralkeyfeatures.First,growthofconsumer interestratesandrealhouseholdincomesmatter expendituresremainedfairlystrong,thoughits moreforthissegmentoftheeconomy.Accord- contributiontorealGDPgrowthlaggedabitfrom ingly,aslongasmortgageratesremainrelatively thepreviousquarter.Forthemostpart,weaker lowandgrowthofrealafter-taxincomeremains growthofconsumeroutlaysreflectedasizable relativelystrong,thenhousingshoulddofine. declineinpurchasesoflighttrucks.Infact,out- Shouldeitherofthesefactorstakeaturnforthe laysfornewlighttrucks—asignificantcomponent worse,itwouldbenaturaltoexpectadifferent ofwhichareSUVs—declinedatadouble-digit outcome. rateforthesecondconsecutivequarter.This Finally,IshouldnotethatthegrowthofU.S. segmentoftheautomarkethasobviouslybeen exportstoforeignresidentsreboundedrather adverselyaffectedbyhighergasolineprices. stronglyinthefirstquarter,butthatthepaceof However,domesticautoandlighttruckssales spendingbyU.S.residentsonforeign-produced improveddramaticallyinApril,andcombined goodsandservicesrosebyevenmore.Because wereupalittlemorethan7percentfromtwo theU.S.economyremainsconsiderablystronger monthsearlier;salesofforeign-producedlight thanmanyofourtradingpartners,andthegrowth vehicleswereupabitmore,about7.5percent. differentialwilllikelypersistfortherestofthis Dissectingthecomponentsofthereport,the yearandintonextyear,foreigndemandforU.S.- largestsinglereasonforslowerGDPgrowthinthe producedgoodsandserviceswillprobablycon- firstquarterwasaslowdowninbusinessexpen- tinuetolagU.S.demandforforeignproducts. dituresonequipmentandsoftware.Business AslongastheUnitedStatesremainsagood investmentinstructuresalsoslowed.Aftergrow- placeforforeignerstoinvesttheirexcesssaving, ingatabouta13percentrateoverthefinalthree oneshouldnotexpectasignificantrealignment quartersof2004,realbusinessfixedinvestment betweenthegrowthofU.S.exportsandimports. 3 ECONOMICOUTLOOK Onbalance,thereseemstobeafirmertoneto and2030.However,China’sprojecteddemandis theverylatestdata,incontrasttothesofttexture expectedtoincreasebymorethan192percent, thatcharacterizedsomeofthepreviousreadings. anditsshareofworldconsumptionisprojected NowI’lldiscussrecentdevelopmentsonthe tonearlydoubleto13.5percent.Tomeetthis inflationfront. increasedworldwidedemand,theIMFprojects thatnon-OPECsupplywillincreasebyabout40 percent;tomakeupthedifference,theIMFproj- RECENT INFLATION ectsthatOPECproductionwillhavetoriseby about112percent.1Already,OPECisestimated DEVELOPMENTS tobeproducingatabout95percentcapacity. Perpetuatingoneoflastyear’smostsignifi- Whatthismeans,inshort,isthatnewfieldsor cantdevelopments,consumersandbusinesses alternativesourcesofenergywillneedtobe continuetofacehigher-than-expectedpricesof foundanddeveloped,orenhancedconservation crudeoilandrefinedproductsthisyear.Toput measureswillberequired. somenumbersintothisdiscussion,I’llconcen- Inamarket-basedeconomylikeours,the trateonpricesforWestTexasIntermediate,the pricingmechanismeventuallyallocatesresources benchmarkgradeofU.S.crudeoil.Attheendof totheirmostproductiveuses.Hence,higheroil 2004,thefuturescontractfordeliveryinDecember priceswillstimulatebothincreasedproduction 2005closedatalittleunder$42perbarrel,and andactiveenergyconservationmeasures,bothof thespotpriceatabout$43.50perbarrel.Byearly whichwilltendtolimitfurtherpriceincreases April,futurespriceshadrisentoalittlelessthan andperhapsreducepricesovertime.Thisprocess $59perbarrelwhilethespotpricehadrisento isnotsomethingthatusuallyoccursrapidly. morethan$57abarrel.Sincethen,spotprices Longer-datedfuturesprices,suchasthecontract havefallenbacktoaround$50perbarrel,but fordeliveryofWestTexasIntermediatein futurespriceshaveonlydroppedtoaround$53 December2009,haverisenfromabout$27.75 perbarrel.Althoughstillhigh,itisusefulto perbarrelinearlyMarch2004tojustunder$48 rememberthatcurrentpriceswouldneedtorise perbarrelcurrently.Thatfactsuggeststhatmany toaround$77perbarreltoreachtheirrecord marketparticipantsbelievethathigheroilprices inflation-adjustedhighsthatwereseeninearly willbewithusforsometime. 1980. Highprices,however,shouldnotbeconfused Traditionally,largeoilpriceincreaseshave withrisingprices.Althoughtheremaybesome principallyreflectedreductions,eitheractualor continuingpass-throughofhigherenergyprices expected,insupplyasaconsequenceofoilembar- intopricesforothergoods,energyitselfshould goesandwars.However,akeyfeatureofthecur- notbeasourceoflong-continuinginflation rentepisodeistheprominenceofdemand-side pressure. factorsassociatedwithanincreasedcallonworld Shouldwebeconcernedabouttheeconomic suppliesbyfast-growingeconomieslikeChina effectsofhigherenergyprices?Overthenear- andIndia.SignificantgrowthintheUnitedStates term,aslastyearshowed,theincreaseinrealoil hasalsoboostedworldenergydemand. prices,whichexceeded25percent,helpedtopro- Lookingahead,itislikelythatdemand-side ducehigherinflationratesandmodestlyweaker pressureswillcontinuetobeimportant.The growththanwouldotherwisehaveoccurred.If InternationalMonetaryFund’slatestWorld thisyear’sunexpectedincreaseinoilpricesper- EconomicOutlookprojectsthatworldoildemand sists,thenitwouldbereasonabletoexpectadrag willincreasebyabout68percentbetween2004 onthegrowthofrealincomes,andthusoutput, 1 InternationalMonetaryFundWorldEconomicOutlook,April2005,Table4.5.Supplyprojectionsaremid-pointestimatesbetweenupper- andlower-boundprojectionsfornon-OPECsupplyandCallonOPEC. 4 TheEconomicOutlook andhigherinflationrelativetowhatwasorigi- toeconomicactivity”from“robustunderlying nallyexpected. growthinproductivity.”Shouldthissupport TheNationalAssociationforBusiness begintoerode—andthereappearstobelittle Economicsrecentlyaskeditspanelofindustry evidencethatithas—oneoftheconsequences economiststoestimatetheeffectontheiresti- wouldbeanelevatedriskofhigherinflation. matesforrealGDPgrowthandCPIinflationfor Laborcostsdependonwagesandproductivity. 2005ifWestTexasIntermediateendstheyearat Laborcostshavebeenincreasingonlymodestly, $56perbarrel,whichiswheretheDecember2005 becauseproductivityincreaseshavebeenalmost futurespricewasinearlyApril.Mostofthepan- aslargeaswageincreases.Ifproductivitygrowth elistsreportedthatthemostlikelyoutcomewould falters,laborcostswillincreasemorerapidly beforrealGDPgrowthtobereducedbybetween and,atsomepoint,firmswillattempttorecoup 0.2and0.6percentagepoints,andforCPIinflation someofthesecostsintheformofhigherproduct torisebybetween0.2and 0.6percentagepoints. prices.Althoughunitlaborcostsedgedmodestly Theseestimatesgivethesensethatenergyprices higheroverthesecondhalfof2004,growingata aresignificantfortheU.S.economy,butnotso 3percentrate,theirrateofgaininthefirstquarter significantastochangetheoutlookinanyfun- of2005slowedtoabouta2¼rate.Eventhough damentalway. costshavedriftedmodestlyhigheroverthepast Iftheeffectsofenergypricestodayseemrel- yearrelativetoafewyearsearlier,asbestwecan ativelysmall,itisusefultounderstandthatthe judgeforecastersdonotenvisionasustained magnitudeoftoday’sincreaseswouldhaveprob- upturnthatwouldgrabtheFed’sattention.If ablyproducedmuchlargereffectsifwewere anything,asthemodestfirst-quartergainsinthe usingtechnologiesandeconomicproduction employmentcostindexshowed,thethreatlevel processesfromthe1970s.Technologicalimprove- isnotterriblyhigh,thoughitisobviouslyimpor- ments,whichhavemadeoureconomymuch tantfortheFOMCtofollowthesedevelopments moreenergyefficient,andimprovementsinour closely. regulatorystructure,whichhaveallowedthe pricemechanismtoworkmorefreely,meanthat today’seconomycanendureperiodsofsharply THINKING ABOUT THE higherenergypriceswithlessdamagethanin OUTLOOK earlierperiods.U.S.energydemandperdollarof realGDPhasdeclinedbyabout21percentsince Inthinkingabouttheoutlookoverthenext 1990,andbyabout38percentsince1980.Thus, coupleofyears,policymakerswillbepaying whilehigheroilpricesdohaveadverseeffects, especiallycloseattentiontothreeunfolding weshouldnotunderestimatethecapacityofthe developments.First,inflationpressuresmay U.S.economytoadjusttothosehigherprices.Our continuetointensify,particularlyforpricesof economy’ssolidperformanceduringtheperiod non-energyandnon-fooditems.TheFOMCwill ofrisingoilpricesoverthepastfouryearsisa havetosortoutwhetherthedataindicatethat testamenttoitsresilience. morerapidpriceincreasesareatemporaryblip Infewareasisthisresiliencymoreevident onanotherwisesteadylong-termoutlookoran thaninthenation’slaborproductivitygrowth, indicationofamorefundamentalinflationprob- whichhasaveragedashadeover3percentper lem.Second,theFOMCwillbefollowingincom- yearsince1996.Inthefirstquarterofthisyear, ingdatacloselytodeterminewhethertherecent outputperhourinthenonfarmbusinesssector moderationineconomicgrowthislikelytoper- roseata2.6percentannualrateafterrisingat sistintothesummerandbeyond.Finally,atwhat abouta1.75percentannualrateoverthesecond pointwillweperceivethatFOMCpolicyactions halfof2004.Forquitesometime,theFOMChas havebeensufficienttomaintainlong-runprice regularlycommentedonthe“ongoingsupport stability? 5 ECONOMICOUTLOOK AsIseeit,thereislittlereasontomodifythe theoppositebecausetheyarenotonlylittle outputandinflationprojectionsthattheFOMC changedsincethefirstoftheyearbutalsostill presentedtoCongressinFebruary.Thecentral belowlastJune’slevelwhentheFOMCbeganits tendencyoftheBoardofGovernorsandReserve policyofbringingthefederalfundstargetrate BankpresidentswasthatrealGDPwouldincrease towardanequilibriumlevel.Tome,thatsuggests bybetween3¾and4percentthisyear,andthat thatthemarketisconfidentoftheFOMC’sresolve corePCEinflationwasmostlikelytocomeinat tokeepinflationwell-controlled.Thisviewis 1½to1¾percent.AstheAprilemployment generallyconfirmedbythefinancialmarket’s reportvividlyshowed,thedatacansometimes viewoflong-terminflationexpectationsovera turnonadime.Whenweputalltherecentdata periodof5to10yearsasregisteredintheyield together,wegetamixedpicturethatdoesnot spreadbetweenconventionalandinflation- requireafundamentalchangetotheoutlook. protectedTreasurysecurities. Nevertheless,weshouldnotforgettheusual TheFOMChasemphasizedthatitisprepared, forecasterrors.Giventheunpredictablethings ifnecessary,tomovemoreaggressivelytopro- thatcanhappen,apointforecastof3¾percent tecttherelativelylowrateofcoreinflationthat realgrowthoverthefourquartersof2005should nowexists.Nevertheless,theFOMC’sbestjudg- reallybeexpressedasagrowthrateof3¾plus mentatthistimeisthatthetargetfederalfunds orminus1¼percent.2 ratecancontinuetoriseatameasuredpaceand TheFederalReserve’sstrategyforencourag- thatthispolicywillmaintaineconomicgrowth ingmaximumsustainableeconomicgrowth withoutrisinginflation. dependsonmaintainingpricestability.Fore- I’veemphasizedonanynumberofoccasions castersweresurprisedbythepickupininflation myviewthattoday’sexpectedpolicypathought lastyear:Theconsumerpriceindex(CPI),the tobeconsideredtentative.Theexpectedpathis bestknownmeasureofconsumerprices,roseby basedontheFOMC’sbestjudgmentfromdata 3½percentoverthetwelvemonthsof2004, currentlyinhand.Iftherearesurprisesinnewly whichwasabout1½percentagepointshigher arrivingdatathatrequireamajorrevisiontothe thanforecastershadexpected.Muchofthisfore- outlook,withregardtoeitherGDPgrowthor casterrorwasduetounexpectedlyhigherenergy inflation,thentheFOMCwillreviseitsexpected prices.Still,whenwestripoutfoodandenergy policypath. prices,wefindthat“coreinflation”rosetoabout TheonlyimportantsurpriseI’veseeninthe 2¼percentonaCPIbasis. pastyearisthattherehasnotbeenamajorsurprise TheFed’spreferredmeasureofpricesisthe intheeconomicdata,exceptforenergyprices. priceindexusedtodeflatepersonalconsumption Thisstabilityintheeconomyisreflectedinthe expenditures(PCE)inthenationalincomeand stabilityofeconomicforecasts.InJanuary2004, productaccounts,lessfoodandenergyprices. theBlueChipconsensusforecastfor2005was OneareaofconcernisthatcorePCEpriceshave forrealGDPtogrowata3.7percentrate.Month risenratherrapidlythusfarin2005;theyareup bymonthsinceJanuary2004theBlueChipcon- atalmosta3percentannualrateforthethree sensusfor2005growthhasbeenremarkably monthsendinginMarch,comparedtothe1½ constant,rangingbetweenalowof3.4percent percentgainseenforallof2004.Asyet,though, thismonthandahighof3.8inseveralmonths, nominalinterestrateshavenotmovedinaman- mostrecentlyJuly2004.Indeed,theconsensus nerthatwouldsuggestthemarketisbeginning was3.7percentlastmonth. toprice-inalargerinflationpremium.Ifanything, TheBlueChipconsensusinflationforecast yieldson10-yearTreasurysecuritiessuggestjust for2005,asmeasuredbythetotalCPI,has 2 Gavin,WilliamT.andMandal,RachelJ.“EvaluatingFOMCForecasts.”InternationalJournalofForecasting,October-December,2003,19, pp.655-67. 6 TheEconomicOutlook changedmore,from2.1percentinJanuary2004 to2.8percentthismonth.Muchofthatincrease reflectsenergypriceincreasesthatwerenotfore- seen.Overthepast12months,thetotalCPIhas risenby0.8percentagepointsfasterthanthe coreCPI. Lookingahead,I’moptimisticabouttheinfla- tionsituation.Wageinflationremainsmodest. Productivitygrowthremainsgood.Thepricing environmentremainsquitecompetitive,which meansthatfirmscannotreadilyexpandprofit margins.Shouldanyofthesefactorschange adversely—wagesrisemorerapidly,productivity risemoreslowly,and/orprofitmarginsexpand— theninflationriskswillrise.AlthoughIbelieve thatinflationrisksaretiltedtotheupside,Ido notbelievethattheprobabilitiesarehighenough tojustifyconcernatthistime.Myoptimismalso reflectsthefactthatmoneygrowth—thefuelfor long-runinflation—remainsquitelowandhas infactdeclinedoverthepast6months. Atsomepointwe’llalmostcertainlysee somesurprisesinthedata.Whatshouldnotbe uncertain,however,istheFed’siron-cladcom- mitmenttomaintainingpricestability.Main- tainingfundamentalpricestabilityiscentralto maximizingsustainableeconomicgrowthand theeconomy’sabilitytoadjustsuccessfullyto inevitableshocks.ThathasbeentheFed’smes- sageformanyyears,anditsguidetoitsownpol- icyactions.Whenastrategyhassucceededso well,whychangeit? 7

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APA

William Poole (2005, May 10). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_20050511_poole

BibTeX

@misc{wtfs_speech_20050511_poole,
  author = {William Poole},
  title = {Speech},
  year = {2005},
  month = {May},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_20050511_poole},
  note = {Retrieved via When the Fed Speaks corpus}
}