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.

The economy overall, in my estimation, is doing reasonably well and could settle into a highly desirable pattern of full employment, trend-like real GDP growth, and well-contained inflation.

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.

With the kind of growth I am projecting — moderately above the economy's long-run potential — we will continue to add new jobs at a healthy pace, without creating undue inflationary pressures. This, in turn, positions us to settle into a prolonged period of sustained expansion.

The effects of Katrina are likely to slow but not stall the forward progress of the national economy. Of course, we must all wait to see the damage that Mother Nature has caused, but for the moment I am hopeful that the damage done to the national economy will be neither substantial nor very long lived.

Looking at the big picture elements—growth, employment, and inflation—I’d say things are in reasonably good shape.

Our baseline outlook for the US economy is one of sustained economic growth and contained inflation pressures.  In our view, realizing this outcome will require the Federal Reserve to continue to remove monetary accommodation.  This generally favorable outlook, however, is attended by some significant uncertainties that warrant careful srutiny.

Despite the challenges...the US economy has remained on a firm footing, and inflation continues to be well contained.  Moreover, the prospects are favorable for a continuation of those trends.

The economy is robust and it will be able to grow at a pretty good pace and inflation should remain in the neighborhood it is in even if we get some adverse surprises.  I think the economy is on a very firm footing.

In my view the economy is generally healthy and should continue to experience good growth over the remainder of this year and into 2006.  My focus remains with the fact that, in an environment where monetary policy has been accommodative for some time, inflationary risks may begin to rise.

We still see a few unusual trends in this expansion: namely, weak employment growth, strong productivity growth, and higher energy prices. But the underlying fundamentals are strong nationwide - low interest rates, low inflation, robust productivity growth, and strong business balance sheets.

This is not a time for complacency. Financial-market innovations, some of which have not yet been rigorously stress tested, along with a macroeconomic environment that, while most likely stable and constructive, contains significant uncertainty, suggest that vigilance and adaptation by both market participants and regulators will be necessary to improve the odds of sustaining this era of damped economic cycles and supporting the orderly evolution of financial markets.

I do not anticipate any break in the pattern of generally favorable economic performance over coming years. Most economic forecasts are for moderate growth and low inflation in the United States for the foreseeable future.

Although the most likely outcome for the overall economy is good, a number of characteristics of the current situation suggest some greater-than-usual risks around that central tendency, and, in particular, raise questions about the pattern of asset price movements that might accompany even favorable overall economic performance. That caution flows from the existence of some unusual imbalances in the U.S. economy today.

These phenomena [the growing current account deficit, dwindling household savings, low level long-term interest rates and the rapid pace of house price increases] could well continue for some time longer, but they are not sustainable indefinitely. At some point, global investors will require higher expected rates of return as their portfolios become increasingly concentrated in dollar assets; house price increases will encounter resistance as they rise relative to income and rents; as housing prices level out, households will recognize that they must increase saving out of income to have adequate resources for retirement; and the Federal Reserve already has been raising short-term interest rates as demand recovers from the shocks of recent years.