The U.S. economic expansion, on track in July to become the longest in history, should have a few more years in its lifespan unless a shock such as a trade war with China intervenes, the senior economist for the Federal Reserve Bank of Chicago said Wednesday.
William Strauss, in remarks to members of Chicago’s financial services sector, also said political pressure on the Fed, particularly its interest-rate setting Federal Open Market Committee, is nothing new, just more public. President Donald Trump often has taken to Twitter to criticize the Fed for keeping interest rates too high and to threaten to fire Chairman Jerome Powell.
In past eras, such pressure would come in phone calls or in Washington corridors, he said. At the Chicago Fed, “we are really trying to do what is best based upon what the economic data suggests,” Strauss said.
“With regard to the influence from the administration and from Congress, this is nothing new.”
Strauss added, “Every president wants lower interest rates.” Politicians prize rate cuts, and the FOMC is expected to make at least one this year, because they can help particular industries and re-election prospects.
But Strauss noted that as a candidate in 2016, Trump accused the Fed of keeping rates too low to help Democrat Hillary Clinton.
Strauss said he’s confident because nothing suggests the U.S. is deviating much from a gradual but persistent growth pattern of about 2.3 percent a year since the 2008-09 recession. He pointed to brisk hiring, low inflation and low energy costs that help both consumers and corporations.
“I do feel fairly comfortable that the economy continues to expand at a fairly decent clip going out over the next several years. So we’ll be continuing to add to our record expansion,” he said.
Trouble could come from a trade war with China, although Trump’s tariffs, real and threatened, that have targeted other countries have done little harm so far, Strauss said.
It’s common for economic forecasters to predict a recession, mostly because the long expansion makes one seem overdue. But Strauss told his audience that whenever it hears that, “The first question out of your mouth should be, ‘Why?’ Give me your story. The economy grows. It grows by 2 percent and you’ve got to tell me why it doesn’t do that. They’ve got to give you the recession shock.”
Strauss spoke at a Willis Tower event sponsored by cyber security firms DefendEdge and Fortinet.
