1. National Economic Outlook October 3, 2014 John Fernald Senior Research Adviser Federal Reserve Bank of San Francisco * The views expressed are my own and do not necessarily reflect the views of the Federal Reserve Bank of San Francisco or others associated with the Federal Reserve System.

2. Summary of Outlook  Recovery from deep recession has been slow, as headwinds associated with the financial crisis have abated slowly  As headwinds fade, moderate growth should continue  Wage growth remains muted, and inflation is expected to slowly increase toward the FOMC’s 2 percent objective. 2

3. Recovery has been slow 3

4. Labor market slack gradually narrowing 4

5. Wage growth muted 5

6. What’s held back the economy? 6

7. Good job growth this year 7

8. Business surveys are strong 8

9. Growth prospects are good 9

10. Inflation gradually returning to target 10

11. Interest rates still low 11

12. Conclusions  After a deep recession and sluggish recovery, a moderate, low-inflation recovery should continue  Interest rates remain low  Risks to the outlook remain, including from weak (and volatile) global economy 12