However, despite the near-term positive fiscal news, no progress had been evidenced on addressing the longer-term fiscal issues involving the significant projected rise in spending for federal health and retirement programs. In any event, I had expected that I would be going into the September FOMC meeting, and then speaking to you, with the U.S. economy on an upward trajectory.
But that expectation changed dramatically when Hurricanes Katrina and Rita came along. Although the combined effect of the hurricanes was contained within a geographic area that accounted for just under 2 percent of the nation's population and roughly the same amount of the nation's production and income, the potential for spillover effects on the economy more broadly was difficult to assess.