EFFINGHAM — The president of the Federal Reserve Bank of St. Louis told Effingham County business leaders Monday that the U.S. economy is slowing down and that the slowdown might be sharper than expected.

The topic of James Bullard’s presentation was “Recent Developments in U.S. Monetary Policy.”

Speaking to about 70 people during an Effingham County Chamber of Commerce luncheon at the Thelma Keller Convention Center, Bullard said the “sharper-than-expected” slowdown may make it more difficult for the Federal Open Market Committee to achieve its 2 percent inflation target.

Bullard said the FOMC continues to face a slowing economy with some downside risk due to the ongoing global trade regime uncertainty. Also, inflation and inflation expectations continue to fall short of the FOMC’s 2 percent target.

“This is occurring despite more than two years of upside surprise on the real growth rate of the U.S. economy,” said Bullard. “This is occurring even though we have the best labor market in 50 years, and we’ve had that for the last two years. If there was ever an opportunity for low unemployment to feed through to higher inflation, it would have been in the last two years, and that hasn’t happened.”

However, the actions taken by the FOMC have also changed the outlook for shorter-term interest rates considerably over the last 10 months, ultimately providing more accommodation to the economy, he said.

“While the overall economy is doing pretty well, it is slowing down relative to 2018 in particular,” said Bullard. “And on top of that, there are a few downside risks to the U.S. economy that could make this slowdown be a little sharper than we are currently expecting.”

Following the presentation, Josh Bullock, president of Lake Land College, said the message was encouraging in that there is a lot of work being done proactively to help mitigate a potential slowdown of the economy.

“They’ve demonstrated it is a slowdown,” said Bullock. “I’m happy to know they are taking the policy of being proactive as possible to ease the changes that might be needed in a slowing economy.”

Should the economy continue to slow, Lake Land College wants to be there to help employees keep their skill sets where they need to be and help employers become more efficient, Bullock said.

David Doedtman of Washington Savings Bank said he was pleased that Bullard took time to speak to the business leaders in Effingham, considering the size of his district.

“I was a little more optimistic with some of the slides he showed,” said Doedtman. “We did think the economy was going down. But, according to his slides, that is to be expected and is really going down to a more normal level. I think it still bodes well for Effingham with what’s going on.”

Doedtman said settling the trade policy with China will help the local farmers and agriculture producers know better what will happen with their livestock and crops. The economic forecast isn’t gloom and doom, but instead slowing to what is considered a “normal level,” he said.

Bullard said the FOMC has tried to help ensure against a downside risk by altering policy in recent months. He said the U.S. economy grew at a 2.5 percent pace during 2018, but growth for 2019 has long been expected to be slower as the economy returns to its potential growth rate.

“The idea that the U.S. economy is slowing is not the surprise, but the idea is that maybe it will be slowing more than we’d like,” said Bullard.

Bullard also touched on the country’s ongoing trade disputes globally saying that he believes it will be difficult to reach a stable global trade regime over the forecast horizon. He added that direct effects of trade restrictions on the U.S economy are relatively small, but the effects through global financial markets may be larger.

On the issue of trade policy, Bullard said there is a lot more uncertainty than what the country may be used to.

“We cannot react directly to day-to-day negotiations and trade policy,” said Bullard. “I think we should think of trade regime uncertainty as being high in the current environment and unlikely to go down anytime soon. I do not expect the trade policy uncertainty to dissipate in the quarters and years ahead.”

Norma Lansing, CEO and President of the Effingham County Chamber of Commerce, said Bullard also met with bankers before the luncheon and was planning to meet with other business people after the luncheon.

Representing the Eighth Federal Reserve District, Bullard tries to visit annually each district in the St. Louis region, which includes Effingham. Other areas are Louisville, Kentucky; Memphis, Tennessee; and Little Rock, Arkansas. The Federal Reserve Bank of St. Louis is one of 12 regional Reserve Banks. Bullard’s job, with the help of his team of researchers, is to guide the nation’s economy by participating on the Federal Open Market Committee in Washington, D.C.

Dawn Schabbing can be reached at dawn.schabbing@effinghamdailynews.com or 217-347-7151, ext 138.

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