Signs point to another robust performance in the fourth quarter, so growth for the last half of 2005 could well come in noticeably above the potential rate.  This positive performance suggests that the overall economy has been quite resilient in absorbing the impact of the storms [Hurricanes Katrina and Rita].  For 2006, it seems likely that this strength will continue in the first half, as rebuilding kicks in.  Then, in the second half, a couple of factors are likely to cause economic growth to settle into a trend-like pattern.  One of the factors is the winding down of the rebuilding effort.  The other is the lagged effect of monetary policy tightening; in other words tighter financial conditions will have some dampening impact on interest-sensitive sectors, such as consumer durables and housing.

Over the last two years real Gross Domestic Product has been growing an average of 3.7 percent each year. This is somewhat faster than potential, or the rate of GDP growth that can be sustained without creating inflation pressures.

We heard that the pace of economic growth had begun to slow slightly prior to Katrina and that the disruptions from Katrina, and later from Rita, would initially slow growth a bit more. The U.S. economy grew at a 3.3 percent annual rate in the second quarter. Now, most forecasters anticipate growth closer to 3 percent in the fourth quarter. Many of them expect the bounce back from rebuilding the Gulf Coast to begin in early 2006, though the impact will be spread over several years.

Disruption of production in the Gulf will undoubtedly slow growth somewhat in the second half—a common estimate is that it will depress national real GDP growth by around one-half to three-quarters percent. This is likely to be followed by a surge in growth as the government-assisted rebuilding kicks in—hopefully before too long.

I believe the U.S. economy remains on a path of sustained expansion, and I expect real GDP to grow at a rate of 3-1/2 to 4 percent in 2005. From a policymaker's perspective, that would be a good outcome and a good place for the economy to be.

We do estimate a three-quarters of a percentage point loss in real growth this year as a consequence of these [gasoline] prices.

Output as a ratio to GDP has gone down very gradually, and indeed the reason...that it's going down is that we are an increasingly conceptual economy; that an ever increasing proportion of what we create, values that...other countries want are nonmaterial.  And therefore we are seeing some gradual decline in goods production as a ratio to overall GDP, but the rest of the GDP being ideas.

The U.S. economy is embarked upon a period of sustained expansion. 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 toward the lower end of this band. Of course, the price of oil is one factor that will play a role in determining the exact magnitude of this number.

Based on econometric estimates done by the Board staff, the increase in oil prices since the end of 2003 probably has shaved roughly 1/2 percentage point off of real GDP growth [in 2004] and they look to restrain growth [in 2005] by approximately 3/4 percentage point.  Aside from these "headwinds," the US economy seems to be coping pretty well with the run-up in crude oil prices.

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.

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.

I expect GDP growth will remain on a very positive path. I think the forecast I made early this year of growth for all of 2005 in the range of 3.5 to 4 percent still seems reasonable.

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.

Looking forward, the economy appears to be on course for a sustained period of solid expansion. I expect real GDP to grow at an annual rate of around 4 percent this year and next, with payroll employment increasing by 150,000 to 200,000 jobs per month.

I see real GDP growth of about 4 percent or so this year [2005]. I also expect to see a continuation of the recent acceleration in job creation as the economy continues to expand. And inflation, while elevated over its pace from a year ago, seems likely to be well behaved on the whole.