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Letter from the President

photo of President Lockhart

As I write my yearly letter to introduce the Federal Reserve Bank of Atlanta's annual report, I have just completed five years at the helm of the Bank.

They have been a challenging five years. We have been through, among other things, recession, bank failures, frozen credit markets, economic turmoil, and the impact of historically low interest rates. And the recovery continues to be a multiyear process that is proceeding at a modest and uneven pace. This annual report focuses on factors that shaped economic performance in 2011.

The report marks the first time the Federal Reserve Bank of Atlanta has produced a solely electronic version. We have developed an interactive, multimedia report, complete with dynamic infographics. We created these features to help us paint a picture of the 2011 economic year and the forces that shaped it. Major milestones for the Bank's overall work during the year are also included in the report.

Embedded in this letter and throughout the accompanying economic commentary are short video segments that enrich the text. I encourage you to watch the videos.

In the commentary, we describe four major forces that helped to shape the economy in 2011, a year marked by modest growth at an uneven pace and by similar experience with regard to unemployment. This unevenness also characterized inflation over the year, but by year's end, broad price pressures had subsided.

This annual report will look at these four forces individually and examine how they influenced the economy in 2011 and also positioned the economy for 2012. The first force felt throughout the year was a continuing process of economic adjustment and adaptation, including "deleveraging." Banks worked on their portfolios to reduce their exposure to real estate, households reduced their debt, and government entities adjusted their finances. As the year wore on, it became more apparent to me that adjusting, adapting, and deleveraging are particularly apt words for what was happening in the economy. For more on this force, watch the video. Video

The second force was certain dynamics in the labor market. The Federal Reserve Bank of Atlanta was particularly interested in the way that these labor dynamics played out in our region. I explain this in the video. Video

The third force was a pervasive atmosphere of uncertainty. The year saw a number of developments that worked to slow economic growth nationally and globally. Concerns regarding regulation, fiscal policy, taxes, and health care costs on the national front and concerns regarding the ongoing sovereign debt crisis in Europe created widespread uncertainty. Shocks related to natural disasters and severe weather such as the Japanese tsunami and nuclear plant meltdown exacerbated this uncertainty. In the face of uncertainties, business became more reluctant to borrow and invest, and consumers became more reluctant to spend. All of this created a drag on the economy. While hard to define, it is clear that uncertainty was a major force in 2011, as I explain in the video. Video

The last force was monetary policy. The Federal Open Market Committee (FOMC) held to the accommodative low-interest rate stance of the previous year. And the FOMC undertook some additional actions in 2011, including efforts to enhance communication around policy. More on this in the video. Video

In 2011, all these influences were at work in a year of slow progress towards full economic recovery. While uncertainty and factors in the labor market were largely negative, adjustment and adaptation along with monetary policy were forces working to bolster growth, especially in the longer run. Recoveries are never straight-line situations. There are ups and downs, twists and turns. The economic commentary throughout this annual report will shed some light on these dominant issues.

Finally, I want to thank all the members of our boards of directors and our advisory councils for their wise input and for their service to the Federal Reserve Bank of Atlanta.

President Lockhart's signature

Dennis P. Lockhart