In the short run, output growth is healthy and inflation rates are stable. Investment shares are reasonable, but that is largely because the United States is borrowing such a huge amount from world capital markets. The key question is whether this borrowing is sustainable. However sustainable it is, the United States would seem well-advised to minimize risks by raising its own national saving to finance its own investment.

I'm bullish on the U.S. market, and the U.S. economy.

My sympathy for the first quarter 'pothole" hypothesis has eroded.

On the whole, these continue to be favorable times for the financial services providers, whether commercial banks or credit unions.

The two perspectives on cycles in the financial services business--the performance of financial services firms in this phase of the business cycle, and what asset quality indicators tell us about the state of the economy--together suggest that growth in economic activity will continue to support favorable conditions for financial institutions for at least the near term.

After going through a foggy stretch of road with potholes and sharp turns, the economy seems to be in a stretch of more open highway. While there can always be surprises around the next corner, I would add that my near-term forecast is for more of the same: GDP growth in the 3 to 4 percent range, continued strong business spending growth, steady employment gains along with a continuing decline in the unemployment rates and low inflation as measured by the Consumer Price Index in the range of 2 ½ to 3 percent.

The US economic expansion has firmed, overall inflation has subsided, and core inflation has remained low.

Yet history cautions that people experiencing long periods of relative stability are prone to excess.  We must thus remain vigilant against complacency, especially since several important economic challenges confront policymakers in the years ahead.

Our judgment...at the moment is the economy is moving forward at a reasonably good pace.

The good news is that we’ve now seen enough positive signs in the economy to have some confidence that it is on course for self-sustaining growth.

The stage is set for further economic expansion and I expect inflation will remain modest as it has for a good number of years now.

If the economy follows the present forecast of slightly above-trend growth, then it would be appropriate for monetary policy to continue to move the real fed funds rate higher. The pace at which we move and the distance we move will depend, of course, on how the economy performs and how the forecast evolves. But we need to be careful to give the world confidence that we will conduct policy in a manner that will keep inflation expectations stable, at low levels.

Markets now reflect a fairly positive view about overall economic prospects. Global growth is reasonably strong and broad-based. Underlying inflation is low. Estimates of structural productivity growth in the United States remain high. The global economy has weathered the oil price shock and other recent shocks quite well. Most of the major emerging market economies look stronger than they have in some time. Overall volatility in output and inflation has moderated significantly in the United States and, to a lesser extent, in other economies as well.

We face a delicate balance between genuinely positive near-term economic conditions, and some fundamental challenges...Even with good policy choices, and with considerable luck, these imbalances [in our economy] will take time to unwind. During this time we face some risk of a more volatile and less benign overall financial environment. This makes it important that we continue to invest in making our financial system stronger and more resilient.

The U.S. expansion has proven quite resilient. We enter the new year with what appears to be a pretty solid underlying pace of growth. Core inflation is moderate, and various measures of inflation expectations suggest confidence in the outlook for price stability. Estimates of structural productivity growth remains high, although there has been some moderation recently.