Description

1st Quarter 2006 Report
After more than 18 years of service as the Chairman of the Federal Reserve Board, Alan Greenspan handed the baton to Ben Bernanke in February 2006. The markets showed little reaction to Chairman Bernanke’s first monetary policy report to the Congress suggesting that the transition has been smooth thus far. Most economists currently expect the Federal Reserve to raise the federal funds rate target at least one more time in an environment where the pace of
inflation slows somewhat and real gross domestic product continues to grow at an annualized pace of about 3.5%.

As noted in the feature of this quarter’s issue, the housing market is expected to slow after another year of record growth in 2005. Higher interest rates and doubledigit
home price appreciation are driving affordability lower. Nonresidential investment spending on structures such as offices and plants is expected to accelerate, however.

Here in Virginia, growth has slowed as well. Employment grew 1.1% over the year ending with December 2005 for a gain of 41,000 jobs compared with a peak of 3.0% in October 2004. Slower growth in Northern Virginia is the culprit—
presumably because of slower spending on defense and security which spurred state growth over the previous three years.