FRBSF University Symposium

Board of Governors

Governor Randall S. Kroszner

Chris ClarkHeidi Downs

Travis George Jim MignanoFinian Small

Current US Economic Conditions • Deceleration of GDP growth

– Consumer spending slowing down– Decrease in residential investment

•Largest decrease since 1991– Inflation is still under control

FRBSF University Symposium

Current US Economic Conditions

FRBSF University Symposium

Percentage Change in Real GDP and Related Measures

-20

-15

-10

-5

0

5

10

15

20

25

2004-Q1 2004-Q2 2004-Q3 2004-Q4 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3

GDPRes. Fixed InvestmentPersonal Consumption ExpendituresGross Private Domestic InvestmentGovernment Spending

Current US Economic Conditions

• Fed Funds Rate: 5.25%

• Low unemployment

• Personal income increased

FRBSF University Symposium

Current International Conditions • Improving current account

– Shrinking trade deficits

• Worsening capital account– Shrinking capital and investment net

inflow surpluses

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Summary of Decision

• Domestic conditions are stable

• International markets are moving toward equilibrium

• A rate increase would only serve to disrupt natural market corrections

FRBSF University Symposium