In the News

DALTON -- Despite risks posed by tariffs and other uncertainty overseas, U.S. Rep. Richard Neal, D-Springfield, and the head of the Federal Reserve Bank of Boston said Friday that the United States' economic outlook is strong.

Neal joined Federal Reserve Bank of Boston President and CEO Eric Rosengren in briefing Berkshire County business leaders and elected officials on U.S. monetary and fiscal policy during a 1Berkshire event at Wahconah Country Club in Dalton. 

The congressman, who is the top Democrat on the House Ways and Means Committee, said he felt it was important to host a discussion on the economy amid the current focus on federal interest rate hikes, and how the Trump administration's trade, tax and foreign policies could impact markets.

"Congress does fiscal policy and the Fed does monetary policy, but there's more analysis of what Congress does than there is about monetary policy, but you can see it's complicated and the amount of information that goes into the decision-making is profound," he said in an interview. "The interest rates are a very important consideration in American economic life ... I think just having (Rosengren) come out here and give an economic forecast is really good."

Rosengren offered insight into how the Federal Reserve decides when to raise or lower interest rates, noting that they are tied to inflation among other economic indicators. 

He also discussed how the Federal Reserve calculates its economic forecasts, weighs labor market data and analyzes risks posed by fiscal policies in the United States and other countries.

Noting that the United States has "had two quarters of really strong growth," Ronsengren said the Federal Reserve's recent move to raise interest rates a quarter-point reflected that "good news."

"You can have too much good news, that's why we want to make sure that we normalize interest rates at a time when the economy is doing really well," he said, adding that the Fed has been raising rates slowly in order to ensure continued growth. 

Rosengren, however, stressed that "there are clear risks for the forecast," including the Trump administration's trade dispute with China, Brexit negotiations and volatility in emerging markets, like Turkey and Argentina. 

He, for example, offered that while current tariffs imposed on Chinese goods have had little impact on the costs of consumer goods, those set to take effect in January could hurt Americans' wallets. 

"We're definitely monitoring those risks, but just because it's a risk you don't start reacting on monetary policy. You want to take your best guess as to what's going to happen in the economy and set rates appropriately. ... One thing you should remember is economists can't predict with any certainty what's going to happen," Rosengren said. 

Neal noted that upcoming talks between President Donald Trump and Chinese officials could mitigate some of those risks. 

"Maybe there will be a path that can be embraced," he said. "We'll know a lot more after that meeting."

The congressman further argued that while some people may think economic forecasting "ought to be a lot easier than it is," it's hard to understand the impacts of various policies in real time.

"The example I would use, is nobody, I think, at the time thought that the Iraq War would go on for 16 years of occupation. I think those are the kinds of considerations you're not able to make projections on," he said.

The Federal Open Market Committee announced in late September that it had decided to raise the target range for the federal funds rate to 2 to 2.25 percent -- up from a previous range of 1.75 to 2 percent. Interest rates on credit cards, mortgages and small-business loans usually also rise when the bank boosts the federal funds rate.