Update on the Economy and Monetary Policy

These remarks update other recent speeches Mr. Broaddus has made regarding the U.S. economic outlook. It is a pleasure to welcome all of you to Virginia, and to have an opportunity to share a few thoughts about the economy and the economic outlook. I will follow my usual format that I think many of you are familiar with. I'll start with a little background information and try to specify as precisely as I can where the economy stands right now. Here I will repeat some things I've said in several talks I've given recently, since the background has not changed much, but I will also update this part with a few observations about developments over the last several weeks. Then I'll speculate a little about the outlook, and finally wind up with a few remarks about Fed policy. By way of background, the recovery from the recession in 2001 started late that year. (We now know this, since last week the National Bureau of Economic Research, which dates U.S. business cycles, declared that the 2001 recession ended in November 2001.) The recovery has continued since then. But it has been a very different kind of recovery from most other recent recovery periods. First and foremost, it has been an exceptionally tepid recovery. Real GDP grew only 2.9 percent last year, fourth quarter to fourth quarter, and it grew at only about a 1½ percent annual rate in the first quarter of this year. This is very modest growth for the early stages of a recovery.