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The outlook for economic activity in the next several quarters is positive, according to Michael Moskow, president and CEO of the Federal Reserve Bank of Chicago. “Sound underlying economic fundamentals appear to be supporting self-sustaining economic growth,” Moskow told more than 200 alumni and friends of Chicago GSB at the Finance Roundtable at Gleacher Center January 12. Employment has increased, but higher home heating bills and the potential for slower home appreciation could moderate consumer spending, he said. “On the balance, though, growth likely will remain solid,” Moskow said. “All these factors add up to a solid base in demand.”
Peter Wall, chief investment officer for JP Morgan Private Client Services, said the equity environment at home and overseas looks “positive, but choppy.” Central bankers in the U.S. and abroad are keeping a lid on inflation, while the American economy is growing, albeit slowly, Wall said. “We expect a little bit of pick-up in direct economic growth in the first half of the year, due to Katrina, Rita, and Gulf Coast restructuring,” he said. “Overall, it will not be too bad, but maybe will stall in the second half of the year—maybe about 3 percent GDP growth on an annualized basis in the second half.”
The short-term federal deficit is decreasing and the percentage of long-term debt in GDP cannot be sustained, Moskow said. However, what’s bound to affect the deficit are Medicare and Social Security, he said. “We have got to address these as a nation,” Moskow said. “They are going to grow at such proportions that we are going to be forced to do something about it. To me, that’s really the key budget problem. These are tough problems to resolve because they involve very difficult political decisions. Our elected leaders have not been able to make those decisions. It’s going to require strong leadership. I certainly hope we do that sooner rather than later.”
—Phil Rockrohr
Coverage of Moskow's remarks appeared in numerous media outlets. Read Reuters article "Fed's Moskow sees more hikes, US growth strong." You can also read a copy of Moskow's remarks.