On the demand side, consumers will continue to spend at a good pace...Looking forward, steady job growth and rising household incomes will fuel continued growth in consumer spending, replacing the stimulative effects of low interest rates and tax rate reductions, which were key to the earlier period of continued consumption growth.

It should be remembered that the United States economy enjoyed a remarkable run in the 1990s. Then, it stumbled as we came into the new century and struggled to find solid footing, going through numerous fits and starts early in the new millennium. Now, in 2005, the recession and recovery phases of the current cycle are behind us, and the economy has entered an expansion phase that I expect will carry us forward for some time.

The U.S. economy is again on a path of sustained expansion.

The imbalances in our fiscal and external positions could be diffused gradually and smoothly. But the transitions to a more sustainable equilibrium could also bring greater volatility in asset prices, less stability in macroeconomic outcomes, slower growth and more uncertainty.

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.

[We are] in reasonably good shape for the rest of 2005—expecting relatively strong growth, continued hiring, solid business investment, and reasonably low inflation—albeit with a number of questions and concerns and some risks on both sides of that projection.

After the economic expansion stumbled in the spring of last year, it now looks to be on a firmer footing. A broad range of economic data suggests that real GDP is growing noticeably above trend...We’ve seen vigorous growth in business spending and solid growth in consumer spending.

Although a complete understanding of the reasons remains elusive, globalization and innovation would appear to be essential elements of any paradigm capable of explaining the events of the past ten years. If this is indeed the case, because the extent of globalization and the speed of innovation are limited, the current apparent rapid pace of structural shift cannot continue indefinitely. While the outlook for the next year or two seems reasonably bright, the outlook for the latter part of this decade remains opaque because it is uncertain whether this transitional paradigm, if that is what it is, is already far advanced and about to slow, or whether it remains in an early, still-vibrant stage of evolution.

This transition from an expansion supported by accommodative fiscal and monetary policy to one broader-based is essential for the expansion to be self-sustaining.

Consumer balance sheets are in good shape on average and interest rates are still at comfortable levels...Employment gains have started to pick up.

It looks like the economic expansion is on solid ground and will continue this year and next year as well...Interest rates are still at comfortable levels that should sustain economic expansion.

[The economy has been growing] close to 4% at an annual rate, and that's a perfectly respectable pace and, frankly, the pace that I think will continue; something in that rough neighborhood.

At present, the economy appears to be well positioned for healthy economic growth with stable inflation going forward. The upside and downside risks to both objectives appear to be roughly balanced.

I now feel that we’ve seen enough positive signs to be reasonably confident that the expansion is self-sustaining.

One reason that consumers are saving so little out of disposable income is that their wealth has been on the rise...recently, the main impetus has been house price appreciation. With interest rates rising now and housing prices unlikely to continuing [sic] advancing at their recent robust pace, consumers will need to curtail their spending to keep wealth growing in line with income. In other words, the saving rate might rise to more normal levels. If this happens, the falloff in spending growth by consumers could have a significant effect on overall economic activity.