By Kathy Canavan
Patrick T. Harker, president of the Federal Reserve Bank of Philadelphia and former president of UD, gave an upbeat economic forecast at the Lyons Economic Forecast this morning.
The annual event is co-sponsored by Lyons Companies and UD’s Center for Economic Education and Entrepreneurship (CEEE).
Asked about negative interest rates, which Fed Chair Janet Yellen said last week she wouldn’t take off the table, Harker replied, “Oh, we’re just examining it. I won’t say any more.”
Harker said U.S. economic fundamentals are sound, the financial system is in good shape, labor markets are dynamic, income growth is solid and consumer spending continues to increase at a solid pace.
He told the sold-out crowd the major risk would be weakening growth in China and extreme volatility on Wall Street.
Harker was optimistic about housing, with multifamily plans robust and permits for single-family homes at their highest level since the recovery began.
He was not so optimistic about business investment, pegging its growth at only 2.5 percent for the coming year.
Harker predicted inflation might be negative this quarter but will hit the Fed’s 2 percent target once oil stabilizes and headline inflation – the measure of total inflation within the economy including commodities – will rise at an annual average pace of 1.5 percent by the second half of the year.
He predicted inflation could increase if wages increase and oil prices rise.
“There is a good deal of anecdotal evidence that firms are planning to raise wages, especially for jobs that are proving to be hard to fill. I do expect some faster wage growth going forward, and accelerating wage growth could translate into more robust inflation,” Harker said. “It is unlikely that oil prices will continue to drop, and eventually, they will become a contributor rather than a detractor from inflation.”
In Delaware, Harker said the loss of DuPont is a stark reminder of the shrinking corporate sector, but education and health services have seen rapid growth.
Michael K. Farr, financial author, echoed Harker’s optimism over the economy, predicting continued slow growth.Political satirist P.J. O’Rourke, a scheduled speaker, had air transportation problems and was unable to make it to Delaware.
The event was actually co-sponsored by Lyons and UD’s Center for Economic Education and Entrepreneurship (CEEE).