Incoming data have generally been better than expected over the past month, suggesting that the U.S. economy continues to grow at a moderate pace. Meanwhile, conditions continue to fare moderately worse in the Twelfth Federal Reserve District than in the nation as a whole, with unemployment rates in many District states remaining well above the national unemployment rate. We expect the U.S. economy to grow moderately in the fourth quarter and over the following two years. In line with relatively strong recent data, we anticipate the economy will expand at a 2.9% pace in the fourth quarter, before settling back to a pace of 2.4% in 2012 and 3.1% in 2013. We also anticipate inflation to remain low over the next two years, reflecting high economic slack, subdued wage growth, and well-anchored inflation expectations.