in fiscal year 2014 landed in the commonwealth. northern virginia has been hit hard by reduced spending with government contractors, and the hampton roads area has been hit hard by defense cuts. virginia ’ s revenue stream has been significantly affected as well, which will make this year ’ s legislative session particularly challenging. the broader context to bear in mind, though, is that the state generally fared better than the rest of the nation prior to and during the most recent recession. to sum up, the key consumer sector has picked up in recent months, and i believe the growth we ’ ve seen recently is more solidly based and is likely to continue. business investment should also contribute to growth this year, but residential investment probably won ’ t add much. federal spending and net exports will likely subtract from overall activity. taking stock of the recent data, i believe the odds are better now that the current pickup in growth will be sustained. in this higher - growth scenario we could see real gdp grow by 2 ½ to 3 percent in 2015. we should not completely dismiss, however, a more temperate scenario in which growth reverts once again to the post - recession average of around 2 ¼ percent. throughout this expansion we have seen periods of growth that were vigorous enough to get our hopes up but were followed by lower growth intervals that left the average growth rate fairly bis central bankers ’ speeches low. on balance, though, while we don ’ t have enough evidence to rule out a return to a more moderate growth path, i am leaning toward the higher - growth scenario as more likely. turning to inflation, let me start by noting that in 2012 the federal open market committee stated that its inflation goal was for the price index for personal consumption expenditures to rise at a 2 percent annual rate over time. over the last 25 years that measure of inflation has averaged 2. 06 percent per year. i am old enough to remember when the president of the united states declared that inflation was “ public enemy number one. ” so i am grateful that the fed took responsibility for inflation and has kept inflation under control. that long - run record may explain why survey measures of expected inflation have been remarkably stable over the last several years, despite the turmoil of the great recession and widespread media speculation about deflation or inflation. at short time horizons, inflation can be volatile, however, and over the last year inflation has only averaged 1. 2 percent. as you probably suspect, much of that weakness reflects the decline in energy prices.

jeffrey m lacker : economic outlook, january 2015 speech by mr jeffrey m lacker, president of the federal reserve bank of richmond, at a conference, sponsored by the virginia bankers association and the virginia chamber of commerce, richmond, virginia, 9 january 2015. * * * i would like to thank roy web for assistance in preparing these remarks. highlights • while gdp growth in 2015 may revert to its post - recession average of around 2 ¼ percent, there are reasons to believe that growth could rise to between 2 ½ and 3 percent this year. • we have seen pickups at other times during this expansion, only to see them subside, but the recent strength in consumer spending and the decline in the saving rate suggest the current higher growth rate can be sustained. many labor market indicators also have strengthened. • the economy still faces some challenges, however, including sluggishness in the housing market, potentially weaker exports and declines in government spending. • inflation is currently below the fomc ’ s target of 2 percent but is likely to move closer to 2 percent after energy price movements subside. • the fomc has no pre - set timetable for raising the federal funds rate target. policymakers should strive to look through transitory phenomena to assess the appropriate path for interest rates. it ’ s a pleasure to be with you to discuss the economic outlook this afternoon. before i begin, i would like to emphasize that these are my own views and should not be attributed to anyone else in the federal reserve system. to put the current outlook in context, it helps to take a glance at the rearview mirror. this expansion has been much slower than any other expansion that anyone in this room is likely to remember. real gdp, for example – our best single gauge of overall economic activity – has increased at an annual rate of 2 ¼ percent per year since the recession ended in the second quarter of 2009. in contrast, the half century before the recession began – including both expansions and recessions – saw real gdp grow at an average rate of around 3 ½ percent. that lengthy period of rapid growth naturally encouraged a strong sense that growth ought to be at least 3 percent and that anything less is disappointing. two fundamental factors contribute to gdp growth over the longer run. one is population growth, which has slowed appreciably in recent years. since the end of the recession, the so - called prime working age population, which consists of individuals ages 25 to 54, has actually declined.