While the economy is still strong, the expansive growth of the last few years has begun to slow down. Chad Wilkerson, branch executive of the Kansas City Federal Reserve Bank’s Oklahoma City branch office, provided some insight to the situation Thursday afternoon at the Southern Oklahoma Leaders Luncheon.

“You can see very strong growth in the U.S. economy for much of 2017 and then especially in 2018,” Wilkerson said. “But here at the very end of 2019 you can see a little bit of slowing in growth.”

However, Wilkerson said some of this slow down was to be expected.

“Part of the stronger growth we saw in 2018 was a boost from the tax package that passed in 2017,” Wilkerson said. “The biggest boost happened in the first year, so we expected a little bit of a slow down.”

In spite of the slowing economic growth, Wilkerson said the unemployment rate is an still an extremely low 3.7 percent nationally.

“Economists might call full employment around 4.1%,” Wilkerson said. “We’re not only below that, but we’ve been below that for about a year now. While we might see a slight uptick in that over the next couple of years, it’s still likely to remain below that 4.1%.”

Like the unemployment rate, the rate of inflation is also quite low. In fact, Wilkerson said the rate of inflation is currently less than the Federal Reserve’s desired rate of 2%.

“At the end of last year we were about at 2% as the economy recovered, but in 2019 we’ve seen prices drop off a bit again,” Wilkerson said. “Part of that was driven by the drop in oil prices. Another thing that has kept inflation lower is the stronger dollar because when the dollar is strong import prices fall.”

Wilkerson then segued into the issue of interest rates and the question of whether or not the FOMC will vote to cut rates later this month. In short, maybe yes, maybe no.

“So far this year, they’ve held rates steady,” Wilkerson said. “And there has been some increasing perception of risks in the global economy. So with that happening, there has been increasing expectations of lower rates going forward.”

He said the FOMC will examine the yield curve which shows the difference in unrest rates across different maturities. Currently the yield curve is inverted which historically has often signaled an oncoming recession.

“Short-term rates were higher than some medium-term rates back in May and now at the moment short-term rates are higher than the whole spectrum of the rate,” Wilkerson said. “Usually with interest rates, longer maturities have higher interest rates than shorter maturities because of the risk associated with having securities for a longer amount of time.”

Wilkerson said even if they do cut interest rates, that does not necessarily mean a recession is coming.

“It’s not unprecedented for the fed to lower interest rates during an expansion to keep the expansion going,” Wilkerson said, adding they did this a couple times in the 90’s. However, they may not cut them at all. “At the moment the economic data may not suggest that that’s what’s needed. If the economic data does move downward and these negative expectations come to fruition, there may be need for some adjustments in monetary policy. But if not, perhaps not.”