As I see it, there is little reason to modify the output and inflation projections that the FOMC presented to Congress in February.

The FOMC will be following incoming data closely to determine whether the recent moderation in economic growth is likely to persist into the summer and beyond.

When we put all the recent data together, we get a mixed picture that does not require a fundamental change to the outlook. Nevertheless, we should not forget the usual forecast errors.

As many analysts have commented, some of the latest data are suggestive of an economic soft patch. I do not disagree with this interpretation, but emphasize that there is so much noise in monthly data that it is unwise to dramatically alter economic forecasts for this year and next.

I would not be at all surprised if [private GDP forecasts] were marked up in response to the strong April jobs report.

The large increase in employment in April reported on Friday, and upward revisions of employment data for February and March, dispelled much of the soft-patch talk.

In the year ahead, the U.S. economy should continue its solid performance, growing nearly 4 percent with productivity growing more than 2.5 percent. Taking a longer view, we will continue to achieve such strong levels of performance if we provide fiscal, monetary, and regulatory policies that encourage an open, competitive, progressive, and noninflationary economy—an economy in which the entrepreneur and the American worker can thrive.

In all likelihood, adjustments toward reduced imbalances in the United States and globally will be handled well by markets without, by themselves, disrupting the good, overall performance of the U.S. economy - provided, of course, that the Federal Reserve reacts appropriately to foster price and economic stability. Still, complacency would be ill-advised.

Although the overall state of the economy is favorable, some aspects of the current situation might be viewed as worrisome. In particular, beneath this placid surface are what appear to be a number of spending imbalances and unusual asset-price configurations.

The U.S. financial system seems less vulnerable to specific shocks and better able to absorb larger shocks than was true in the relatively recent past. At the same time, however, changes in the structure of the financial system and an increase in product complexity could make a crisis more difficult to manage and perhaps more damaging...While the probability of a major crisis induced by the financial failure of a major institution may be lower, the damage associated with such an event could be higher.

Maybe we are hitting something similar [to the 'soft-patch' in the 2nd quarter of 2004], but I caution you that we have only had a few readings that suggest a softer economy, but it is certainly something to watch.

With accommodative financial conditions, I expect that the economy will continue to expand at a solid pace this year.

In this environment, the economy is likely to remain on a path of solid growth, strong enough to continue to gradually reduce unemployment and raise operating rates in industry for a while.

Judging from aggregate measures of wages and labor compensation, the economy is still operating a little below its long-run sustainable level of production.

Economic activity has shown a good bit of forward momentum as businesses have stepped up their purchases of capital equipment and households have continued to increase their spending on consumer goods and services and on houses. As a result, economic growth has been sufficient to continue eroding slack in labor and product markets.