The Economic Outlook, January 2010

Thank you for inviting me to join you again this year to discuss the economic outlook, a task that is distinctly more pleasant now than it was a year ago. When I spoke with you last January, economic activity was contracting quite sharply, and while I thought it was reasonable then to expect positive growth in the second half of last year, there was substantial uncertainty about how the contraction would ultimately play out. In particular, the possibility of a deeper contraction could not be dismissed. In the end, however, positive momentum did indeed return. Third quarter growth in real GDP exceeded 2 percent, and most economists expect to see a determination that the recession ended in the middle of last year. While that is undoubtedly good news, the level of economic activity is still far below where it was a couple of years ago; unemployment is quite high and many households and firms are making do with far less than they once did. Moreover, substantial economic challenges lie ahead for the U.S. economy. Having said that, I do believe that growth will continue this year and incomes will generally improve. In my remarks today I will discuss the outlook for growth and inflation in the year ahead, and will touch on some of the important economic challenges we face. Before I begin, I should note that I speak only for myself and not for my colleagues on the Federal Open Market Committee.