President Jeffrey M. Lacker - Federal Reserve Bank of Richmond

It is a pleasure to speak on the economic outlook this morning, in part due to this distinguished Ohio Valley audience, and in part because the outlook is so encouraging. Growth is proceeding on a solid pace this year, and inflation is low and stable. Moreover, our economy has withstood several substantial shocks over the last several years, and yet has remained on course. So, I think we have abundant reason to be grateful for a quite positive economic outlook. Before I begin reviewing that outlook, however, I would like to note, as usual, that the views expressed are my own and are not necessarily those of my colleagues in the Federal Reserve System.

I would like to talk to you tonight about the evolution in the way the Federal Reserve goes about conducting monetary policy. As my title suggests, one theme is that a transition is taking place. Of course, the most striking transition at the Federal Reserve this year is the change in leadership. On January 31, Federal Reserve Board Chairman Alan Greenspan served his last day in office and chaired his last meeting of the Federal Open Market Committee. His successor, Ben Bernanke, took over the following day, and tomorrow morning, he delivers his first testimony to Congress as chairman.

I would like to talk to you tonight about the evolution in the way the Federal Reserve goes about conducting monetary policy. As my title suggests, one theme is that a transition is taking place. Of course, the most striking transition at the Federal Reserve this year is the change in leadership. On January 31, Federal Reserve Board Chairman Alan Greenspan served his last day in office and chaired his last meeting of the Federal Open Market Committee. His successor, Ben Bernanke, took over the following day, and tomorrow morning, he delivers his first testimony to Congress as chairman.

It is a pleasure to be with you today to discuss the economic outlook for 2006 and beyond. It is a pleasure, in part, because the economic outlook is fairly encouraging. Growth is on a solid footing, despite this year’s run-up in energy prices and the disruptions of a devastating hurricane season. And after a brief pause this fall, employment is expanding again at a healthy pace, consumer spending continues to grow briskly, and business investment spending is robust. Granted, housing activity seems to be softening, and at least some potential price level pressures remain, so it may be too soon to break out the champagne. But inflation expectations remain contained, and we at the Fed are well-positioned to resist inflation pressures, should they emerge.

It is a pleasure to be with you today to discuss the economic outlook for 2006 and beyond. It is a pleasure, in part, because the economic outlook is fairly encouraging. Growth is on a solid footing, despite this year’s run-up in energy prices and the disruptions of a devastating hurricane season. And after a brief pause this fall, employment is expanding again at a healthy pace, consumer spending continues to grow briskly, and business investment spending is robust. Granted, housing activity seems to be softening, and at least some potential price level pressures remain, so it may be too soon to break out the champagne. But inflation expectations remain contained, and we at the Fed are well-positioned to resist inflation pressures, should they emerge.