1. FRBSF University Symposium Federal Reserve Bank of San Francisco Michael Choi Christina Collada Karl Garbacik Lance Lloyd Robert Sinclair Andrew Speer

2. 12 th District Unemployment Rates (%) Arizona 4.7% Hawaii 3.0% California 4.8% Alaska 7.0 % Oregon 5.6% Washington 5.3% Idaho 3.6% Nevada 4.5% Utah 3.4%

3. Pass-through effects of higher energy prices have caused upward pressure on core inflation, but falling energy prices are likely to lessen and exert downward leverage on core inflation

4. The Cooling Housing Market Overall housing sales are declining but California was hit hardest by the slowdown

5. Oil prices have steadily fallen from the mid 2006 peak

6. Growth The initial estimate of real GDP growth during the third quarter was 1.6 % which is about half the average pace during the last two years. The economy seems likely to grow at a 2.5% to 2.75 % pace in each of the next two quarters. This forecast balances the effects of a cooling housing market with solid growth performance in the remaining 95 % of the economy outside residential construction FRBSF University Symposium

7. Policy Recommendation 1. Economic growth slowed, but expansion will continue at a moderate pace. 2. The housing market cooled off, especially in California easing inflation pressures. 3. Oil prices also declined adding relief to inflation pressures. The Federal Reserve Bank of San Francisco recommends to keep the federal funds rate steady at 5.25%