MISSOULA — The head of the Federal Reserve Bank of Minneapolis visited the University of Montana on Monday to hold a public town hall to discuss the state of Montana's economy.
By their accounts, the economy of Montana as a whole is in a pretty good spot when it comes to the economic data coming out.
“Overall economic growth is strong in our country and in our region. This region of the country has a pretty diverse economy that gives us a lot of economic resilience," Minneapolis Federal Reserve Bank President Neel Kashkari noted, "So, a lot of the fundamentals are looking really positive right now.”
The measure of “how an economy is doing” comes from two different measurements according to the Fed. The first being employment and the second being inflation. They like to think of those two measures as being on opposite ends of a seesaw.
On one side, employment — and unemployment — help the Federal Reserve determine how the labor market is doing. They want the maximum number of people that can work to be working.
On the other end is inflation. The Fed wants stable prices for consumers and inflation — or the inflation rate — which is a good measure to see if market prices are as they should be.
With these two measurements, the Federal Reserve is able to make adjustments to the one tool at its disposal — interest rates, which are the cost of borrowing.
While the everyday consumer may not be going to the Fed directly for loans, the banks that the people use are. The banks then pass on these interest rates to the consumer.
In large part, the Fed sets interest rates to either help promote growth in the economy by setting them low, or by depressing the economy by setting them high to keep inflation low.
Currently, interest rates sit between 5.25% and 5.50% which is regarded as rather high.
With the rates this high, many have been asking the Federal Reserve when they are going to cut the rates as inflation has trended down and the labor market remains strong, both locally and nationally.
“We’ve seen a lot of inflation come down over the course of the past year. If we continue to see progress with inflation falling at that point, I would expect it would make sense to then lower interest rates a little bit," Kashkari told MTN. "We won’t need as much pressure to try to slow the economy down.”
Many have been holding their breath waiting for these interest rate cuts to come and it seems that if the economy — both on the local and national — continues to keep going in its current trajectory, then rate cuts may be in the future.
We’ll just have to wait and see how near that future is.
