The country and the state of Utah are on the right economic path, as the Federal Reserve slowly increases interest rates and the Intermountain West develops as a tech corridor, according to the president of the central banking system’s Western region.
“[We’re in the ninth year of economic expansion. People can’t lose track of that,” said John C. Williams, president of the Federal Reserve Bank of San Francisco, whose nine-state territory includes Utah. In an interview with The Salt Lake Tribune, he noted that the country has experienced only two longer periods of economic growth since the Civil War — one in the 1990s, the other in the 1960s.
Williams was in Utah to meet with officials of the Reserve’s branch office in Salt Lake City and to meet with students and faculty at the Brigham Young University business school.
Janet Yellen, his predecessor in the Western region and appointed Fed chair in 2014 by then-President Barack Obama, has “done a terrific job,” he said. “She was a very strong voice for the policies taken to end the recession and get this country back to work. … It’s a really remarkable record she’s accumulated over the years.”
Her four-year term as chairwoman ends next February. Indications are that Treasury Secretary Steve Mnuchin is pushing President Donald Trump to select Jerome Powell, a member of the Fed’s board of governors, as her replacement.
“[Yellen] has guided monetary policy and the economy through this period of very long expansion and strong job growth in a way that’s underappreciated,” Williams said, asserting that she managed the slow but steady economic recovery in a way that has left the Fed “well positioned to deal with whatever changes” on world economic fronts.
Williams said he agrees with Yellen’s approach to raise interest rates slowly over the next few years and to continue a practice, started just this month, in which the Fed will stop reinvesting many of the $4.5 trillion worth of Treasury bonds and mortgage-backed securities it snapped up when the Great Recession was peaking, hoping to stimulate the economy by pushing down rates.
“We’re on the right path, gradually raising interest rates over the last couple of years,” he said. “It will be appropriate to do so for the next couple of years, nudging them up to the new normal.”
Within his region, Williams said Utah “stands out in strong job growth. A lot of people don’t think of Utah and Idaho as tech centers, but there is a lot of tech-job growth here.” And like other states in the flourishing West, the main problem many Utah companies face is finding enough skilled workers to fill available positions.
While local residents have been devastated by California’s wildfires and the hurricanes that wasted parts of Texas, Florida and Puerto Rico in recent weeks, those natural disasters are unlikely to impact the national economy, he said. “Do they change my view of where the economy will be in 12 to 24 months?” he asked rhetorically. “No.”
Far more meaningful will be whatever Congress does with Trump’s plan to overhaul the tax system and his success in removing regulations deemed burdensome by businesses, Williams said. However that political process turns out, Williams believes the Federal Reserve is prepared to deal with the consequences.
Using a tennis analogy, he said, “We’re in the middle of the court ready for whatever happens, forehand or backhand. Inflation is low but moving in the right direction. … We can use interest rates to keep the economy growing at a sustainable rate. So this is a good place to be.”
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