After growing at a fairly strong pace at the end of last year, real GDP has decelerated. Some of the slowdown is probably due to temporary factors, however, a broad range of economic indicators for the second quarter has come in softer than we expected. Falling commodity prices, combined with only a gradual drop in the high unemployment rate, suggest that inflation pressures will be very limited. 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. Our current view is that real GDP will grow about 2 to 2½% this year and next. We also expect inflation to remain below a 2% annualized rate this year and next.