The impact of the easing steps we have already taken will ripple out into the economy in the coming months. That's one of the factors making me believe that growth is likely to increase in the second half of this year, and reach a more acceptable level next year. Fortunately, the underlying rate of inflation is not accelerating, and long-term inflation expectations appear contained. So should further unexpected weakness in spending materialize, the Fed has the latitude to again respond quickly and effectively. Just as I believe we have done in the past four months.
Sustainable growth is the goal.
Based on the experience of the late 1990s, I believe the national economy can sustain real output growth of 3 to 4 percent per year, and an unemployment rate of 4 to 5 percent. If my assessment of the economy's potential for sustainable growth is on target, the current slowdown has taken us from too rapid a pace to one that's much too sluggish. Now, let me turn from the national economy to economic developments in our own region. As you know, the Federal Reserve Bank of Philadelphia serves a District comprised of eastern Pennsylvania, southern New Jersey and the state of Delaware. As Bank president, I have the opportunity and responsibility to represent the District in the Fed's monetary policy deliberations, so I have a keen interest in economic developments here.