Federal Reserve official says he looks to Bacon for insight on the economy – Inforum

A National Bank official said he’s looking to North Dakota’s oil industry for clues about the health of the region’s economy.

„The Bakken and North Dakota are really interesting in terms of giving me insight into what’s going on here and what that means for the broader economy,” Neal Kashkari said Thursday, May 16, at the Williston Basin Petroleum Conference in Bismarck.

Kashkari is president of the Federal Reserve Bank of Minneapolis, which serves North Dakota, South Dakota, Montana, Minnesota and parts of Wisconsin and Michigan. The Federal Reserve Banks are independent financial institutions that govern the US economy.

Under normal circumstances, when the economy is healthy, unemployment is low and the average inflation rate is around 2%. However, if one of those factors is thrown out, the Federal Reserve may decide to intervene.

„If the economy is growing too slowly, traditionally we would cut interest rates and try to stimulate that,” Kashkari said. „If the economy overheats and inflation is too high, as has been the recent experience, we raise interest rates to try to put the brakes on the economy to bring inflation back down.”

The Federal Reserve conducts extensive research to help inform those decisions, he said — including looking at employment opportunities in the Bakken.

„There are times when the labor market here is incredibly tight, it’s not so tight around the U.S. economy, and you attract workers from all over the U.S. to come here — create opportunity, higher wages and challenges in the local economy,” Kashkari said of North Dakota.

Neil Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, speaks to event attendees during the Williston Basin Petroleum Conference on May 15, 2024 at the Bismarck Event Center.

Michael Achterling / North Dakota Monitor

Lately, though, that hasn’t been the case. The entire country has more jobs than workers to fill them.

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„If you have a particularly hot sector, you can’t attract workers from other parts of the country because everybody across the country has tight labor markets,” he said.

According to Kashkari, tribal economies are another important area of ​​Minneapolis Federal Reserve research. That’s because even when the U.S. economy is strong, tribes often face barriers that prevent them from accessing that wealth.

Their hope is to identify policies that governments can use to break down those barriers.

„Tribal economies have unique challenges,” Kashkari said. „The economy can be doing well, different businesses can be doing well, and we still have people who are not participating in our economy.”

Where is the US economy now?

A combination of factors including Covid-19, supply chain issues, increased demand for consumer goods and Russia’s invasion of Ukraine are expected to increase global inflation in 2021, 2022 and 2023.

These days, however, the economy is doing well, Kashkari said.

Nationwide unemployment remains relatively low — it was just under 4% at the end of April, according to the U.S. Bureau of Labor Statistics. While inflation is still rising faster than ideal at 3.5%, it is a far cry from its peak of 9% in late 2022.

Consumer spending is also strong.

„The gloomier it appears when surveyed about how people feel about the economy, the better people feel about the economy,” he said. „If you go on airplanes, they’re usually full. If you go to restaurants, they’re usually full. If you go to a hotel, they’re usually busy.

The housing market is also unexpectedly resilient, he said. It remains competitive even after a series of mortgage hikes by the Federal Reserve in 2022 and 2023.

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The average rate for a 30-year fixed mortgage was 3% before 2022, but today it is 7.5%.

„We think the demand for housing is high,” Kashkari said. „Over the past decade there has been a housing shortage across our economy.”

The conference continues till Thursday with more than 2,200 participants.

This story was originally published on NorthDakotaMonitor.com


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