For Immediate Release: June 11, 2004
ATLANTA – With economic growth broad based and hiring gaining momentum, monetary policymakers must take into account a new set of issues to sustain economic expansion and keep prices stable, said Jack Guynn, president and chief executive officer of the Federal Reserve Bank Atlanta.
Guynn described the recent labor market recovery as fairly broad based across sectors. The U.S. economy has added nearly 1.2 million jobs so far in 2004, with monthly gains for the past three months averaging about 315,000. Since last August, when payrolls were at their weakest level, the economy has made up more than half of the jobs lost since employment peaked in March 2001, he added.
With strength in the labor market now apparent, Guynn said the economy will face new issues. For instance, disinflation, which was a concern a year ago, appears increasingly unlikely, but Guynn said a flurry of price increases in 2004 warrants close attention.
Guynn said he expects consumer prices to remain within acceptable ranges similar to those seen just before 2001, and he reiterated the Federal Open Market Committee’s recent statement that long-term inflation expectations remain well contained. But he cautioned that “a great deal depends upon how much of the recent spate of price increases turns out to be transitory,” adding that “recent developments on the price front warrant significant attention.”
Reflecting on monetary policy, Guynn said he believes that “financial markets, business leaders and consumers have a good sense of the need to get back to a more neutral monetary policy setting.” But he added his personal view that recent Fed statements should not be construed as a rigid precommitment to a particular course of actions.
“I believe our policy response should be dictated by how things eventually unfold,” he said. “As Fed policymakers, we need to stay alert and respond appropriately to what’s happening around us.”
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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