To: Mohan Marette who wrote (122649 ) 5/6/1999 9:59:00 AM From: Lee Read Replies (3) | Respond to
Mohan,.>Re:.AG's remarks At the 35th Annual Conference on Bank Structure and Competition of the Federal Reserve bog.frb.fed.us Forecasts of inflation and of growth in real activity for the United States, including those of the Federal Open Market Committee, have been generally off for several years. Inflation has been chronically overpredicted and real GDP growth underpredicted. An increase in inflation doggedly forecast to follow the ever lower unemployment rate--now the lowest in three decades--has not occurred. In fact, even after accounting for the reduced bias in our price statistics resulting from methodological improvements, some measures of inflation have even continued to ease. I say that accelerated labor productivity is arguably at the root of declining domestic valued-added price inflation because it can be misleading to identify a single variable as the exogenous force in an essentially interactive process of cause and effect. Owing to advancing information capabilities and the resulting emergence of more accurate price signals and less costly price discovery, market participants have been able to detect and to respond to finely calibrated nuances in consumer demand. The outlook for the American economy is particularly relevant to the realization of a full recovery of East Asia.
