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Boston Fed President, Cathy Minehan, who at the annual International Treasury Management Conference at the World Trade Center in Boston this morning, feels that U.S. productivity growth will continue to support the economy and that inflation remains, "well behaved". Economic growth should average around two-percent for fiscal year 2001.
The U.S. economy should continue to feel the effects of a sharp adjustment in inventories throughout the first quarter, but there exists positive signs that suggest it will return to a healthy rate of growth later this year. The correction in inventories is the result of an unexpected rapid adjustment toward more sustainable growth in demand.
"Consumer attitudes pose challenges for the U.S. economy in the short run," Minehan said, but she feels that the economy is better positioned to weather these short-run adjustments than it was in previous periods of weakness.
She credits limiting the inventory buildup to "just-in-time" inventory processes and rapid production adjustments. These processes should help reverse the inventory overhang more quickly than is usual.
Referencing the recent 100-basis points of Fed easing, she said, "This may help shore up confidence, creating some rebound in spending by both firms and consumers, [where] recent signs are at least somewhat encouraging here."
She added that vigilance on the part of the Federal Reserve is necessary.
Her view of near-term risk includes the level of private savings and the softness in domestic demand in many foreign countries.