Stable Economy Ahead?
In a recent article published in USA Today, William Poole stated that he feels that inflation is well contained, and he feels that the economy is optimistic. William Poole has been president of the Federal Reserve Bank of St. Louis for nearly seven years. In this interview, conducted by Barbara Hagenbaugh of USA Today, Poole expresses his thoughts on the economy, job growth, inflation, productivity growth, and interest rates.
When asked,"How's the Economy?", Poole expressed that he feels we are on a stable and secure track. This year has come in unusually close to the forecasts and business confidence has grown. Poole states that firms seem to be a little less unduly cautious, but there is still a great deal of discipline. I feel that with these basics in place Poole has made an educated and correct opinion about the economy.
Job growth for the year came in slower than expected this year. When asked if he felt this was a concern, Poole's basic response was no. The gross domestic product was so close to expectation, the slightly slower-than-expected job growth is just the opposite of the somewhat greater-than-anticipated productivity growth. Because we have so much going for us, Poole does not see productivity growth as slowing down enough and long enough to turn itself into an issue. I agree. There may be short, temporary slow downs in the productivity growth rate, but these will be short and insignificant to affect the long-term growing trend of the productivity growth rate.
Poole feels that inflation is pretty well controlled right now. The inflation expectation suggest people out there in the markets anticipate inflation will remain roughly in the same range that it has been. Companies opening new stores have several times more than the number of applicants for the numbers of sales associates positions that they are filling. With these thoughts there is no wage pressure. Poole feels that low increases in unit labor costs are an essential feature of a low inflation environment. I agree. Wages and productivity together determine unit labor costs. Poole states, "The fundamentals seem to me to point toward continuing, very modest changes in prices at the aggregate level because of unit labor costs."
To maintain an equilibrium at a low and stable inflation rate will require higher interest rates. We started out at a low level and we have to get rates back to a normal range. This makes sense. The interest rates cannot stay low forever and have a stable inflation rate.
I agree with everything that Poole said in this interview. I feel that right now the economy is doing relatively well and that if things keep going on this track there will be a stable and secure economy ahead.
This article can be found at: http://www.usatoday.com/money/economy/fed/2005-02-22-poole-usat_x.htm
When asked,"How's the Economy?", Poole expressed that he feels we are on a stable and secure track. This year has come in unusually close to the forecasts and business confidence has grown. Poole states that firms seem to be a little less unduly cautious, but there is still a great deal of discipline. I feel that with these basics in place Poole has made an educated and correct opinion about the economy.
Job growth for the year came in slower than expected this year. When asked if he felt this was a concern, Poole's basic response was no. The gross domestic product was so close to expectation, the slightly slower-than-expected job growth is just the opposite of the somewhat greater-than-anticipated productivity growth. Because we have so much going for us, Poole does not see productivity growth as slowing down enough and long enough to turn itself into an issue. I agree. There may be short, temporary slow downs in the productivity growth rate, but these will be short and insignificant to affect the long-term growing trend of the productivity growth rate.
Poole feels that inflation is pretty well controlled right now. The inflation expectation suggest people out there in the markets anticipate inflation will remain roughly in the same range that it has been. Companies opening new stores have several times more than the number of applicants for the numbers of sales associates positions that they are filling. With these thoughts there is no wage pressure. Poole feels that low increases in unit labor costs are an essential feature of a low inflation environment. I agree. Wages and productivity together determine unit labor costs. Poole states, "The fundamentals seem to me to point toward continuing, very modest changes in prices at the aggregate level because of unit labor costs."
To maintain an equilibrium at a low and stable inflation rate will require higher interest rates. We started out at a low level and we have to get rates back to a normal range. This makes sense. The interest rates cannot stay low forever and have a stable inflation rate.
I agree with everything that Poole said in this interview. I feel that right now the economy is doing relatively well and that if things keep going on this track there will be a stable and secure economy ahead.
This article can be found at: http://www.usatoday.com/money/economy/fed/2005-02-22-poole-usat_x.htm
2 Comments:
At 6:02 PM, songbird said…
This was a great artical and I agree as well. The ecomony to me acts like a see-saw. There is a period of growth, and then there is a period of decline which is followed again by a period of growth. I do believe that we are in that period of growth. 911 hit the economy very hard, but it has begun to rebound and in the next years to come, it will significantly grow.
At 6:35 PM, daisy said…
I enjoyed this artical as well and feel that the ecomony is in a small period of growth. The growth is harder to see when you are the small guy just looking for a job. But glad to know things are looking up in the ecomony.
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