For immediate release: March 4, 2004
ATLANTA — As growth in the U.S. economy gains momentum, the Federal Reserve will at some point need to reassess its current accommodative monetary policy stance, said Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta.
“If my forecast for robust economic growth materializes, then, at some point, a federal funds rate of 1 percent will no longer be the best monetary policy,” said Guynn, speaking to the Best in Atlanta Real Estate awards dinner hosted by the Atlanta Business Chronicle.
Guynn said he expects the strong pace of growth reported in the second half of 2003 to carry forward this year, but with a different composition. Spending on housing and durables should continue to grow steadily, but he said, “I don’t think we can expect to see these sectors continue to grow at some of the rates we saw last year.”Guynn noted that job growth, while improving, is not yet sufficient to accommodate the expected influx of new jobseekers. But he cited evidence that job growth should improve. “Overall, I think 2004 will be a good year,” he added.
He also addressed the role of monetary policy in cushioning a recessionary period and stressed the importance of eventually returning to more historically normal interest rate levels as the economy gains strength, but he did not cite specific timing.
He advised businesses not to assume a continuation of accommodative policy in future plans. “Just as I don’t want concerns about future inflation to play a major role in business decision making, I also don’t want businesses to build their plans on expectations of a continuation of accommodative monetary policy without regard to prospective economic conditions,” Guynn said.
The Federal Reserve Bank of Atlanta serves the Sixth Federal Reserve District, which encompasses Alabama, Florida, Georgia and parts of Louisiana, Mississippi and Tennessee. As part of the nation’s central banking system, the Atlanta Fed participates in setting national monetary policy, supervises numerous commercial banks and provides a variety of financial services to depository institutions and the U.S. government.
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