A slow start in 2002 was followed by three years of strong gains in real (that is, inflation adjusted) economic activity and a substantial decline in unemployment. Initially, monetary policy was very accommodative as the FOMC focused on providing support for the recovery and avoiding an unwelcome disinflation.
From early 2003 to early 2006, real gross domestic product (GDP) rose at an annual rate of 3-1/2 percent – well above consensus estimates of its underlying sustainable rate – and the unemployment rate declined to 4-3/4 percent. Since the spring of 2006, however, the expansion of the U.S. economy appears to have been undergoing a transition to a more moderate and sustainable pace.