CHICAGO – The United States is experiencing a period of "quite weak" economic activity and the timeline for an economic recovery remains uncertain, the head of the Federal Reserve Bank of Chicago said on Tuesday.
Although he did not label U.S. economic performance as recessionary, Chicago Fed President Michael Moskow noted that the National Bureau of Economic Research said on Monday it had determined a U.S. recession began in March. The institution is a private organization that traditionally dates business cycles in the United States.
"Yesterday's announcement underscores the fact that the events of September 11 had a sudden adverse impact on the economy," Moskow said of the NBER announcement in the prepared text of a speech to Chicago business leaders. "The economic recovery that -- before September 11 -- we had expected to begin this year, will be delayed. We expect the economy to improve next year, although the timing is uncertain."
Moskow, a voting member this year on the Fed's panel that sets interest rates, gave very similar speeches on both Nov. 13 and Oct. 25.
The Chicago Fed chief reiterated that businesses and consumers were more cautious and were delaying spending decisions due to heightened economic uncertainty after the hijack attacks on Sept. 11, although he noted that automakers have extended their cut-rate financing programs and mortgage refinancings have been extensive.
He said consumer confidence would be an important factor in household spending, although confidence could be fragile if news from the job market continues to be negative.
Moskow said one encouraging development over the longer term was the recent agreement by members of the World Trade Organization to launch a new round of multilateral talks.
"These negotiations should lead to economic benefits both here and abroad," he said. "Indeed, open markets and expanded trade are one of the best ways to increase economic growth, particularly in developing countries."
The Fed has lowered short-term interest rates 10 times so far this year in an effort to boost the sagging U.S. economy. The key fed funds rate, which affects borrowing costs across the U.S. economy, now stands at a 40-year low of 2.0 percent, down 4.50 percentage points since the beginning of the year. The Fed's final monetary policy meeting of the year is slated for Dec. 11.