You need to keep in mind that our economy is in unexplored territory in many respects. Historic patterns of movements in interest rates, exchange rates, and house prices may not be very good guides to future relationships.

I've been really pleased that the market based measures of inflation expectations have subsided in the last month or two. It is clear now that the whiff of softness [in growth] that we got in the spring was transitory and the inflation numbers have been better after an adverse bulge.

The real economy has performed very close to expectation at the beginning of 2004. The major surprise has been the large increase in energy prices. The market has interpreted this increase as a relative price change and not a sign of higher long-run inflation.

I believe that the current outlook for the economy is quite favorable.

I do not believe an inverted yield curve will be a sure-fire indicator [of an upcoming economic downturn].

I believe the US economy is embarked upon a period of sustained expansion…And after a mild scare of another 'soft patch' earlier this year, the economy looks to be expanding at a moderate pace. Looking forward, I expect real GDP to grow at a rate of 3-1/2 to 4 percent through 2005. Earlier this year I would have favored the upper end of this range, but recent events have dampened that forecast somewhat.

I also expect inflation to remain well contained in 2005, both overall and by core measures that exclude food and energy prices. My scenario of solid output growth, at or just slightly above the economy's long-run potential, and steady job gains, which gradually bring the labor market into better balance, is consistent with a relatively stable price environment.

Swings in business investment spending have driven the pattern of this past business cycle…Firms are positioning themselves for greater efficiency and greater productive capacity…However, the last number we received on business investment from the first quarter GDP figures was lower than some expected, though clearly positive. Nonetheless, going forward, I anticipate that robust growth in business investment spending will continue to play a major role in our growth through the remainder of the year.

Despite the uneven character of the expansion over the past year, the U.S. economy has done well, on net, by most measures.

This economy may be slowing but this is still a good economy...We are doing pretty good growing at 3-1/2 percent.

As economic conditions and business loan demand have improved, we have expected and seen some degree of easing in commercial lending standards.

The U.S. banking industry is healthy, strong, profitable, and well positioned to support economic growth and prosperity...The outlook for performance in the coming year is good. 

I am inclined to attribute at least some of the recent softness in growth to general skittishness about the springtime run-up of energy prices.

In the last couple of months, we have had a kind of soft spot...It's been in some ways broad-based...In part, the slowdown is due to higher energy prices...It's natural to see both confidence decline and spending on other things take a dive...But I wouldn't want to exaggerate the softness...The job market seems pretty strong...Oil prices have backed off some...[This is] a transitory slowdown as consumers adjust and then consumer spending will pick up again toward a more normal level.  We have a pretty sustainable expansion here.

On balance, there seems to be a firmer tone to the very latest data, in contrast to the soft texture that characterized some of the previous readings.