Productivity needs to ramp up or the U.S. economy will end its winning streak, St. Louis Federal Reserve President James Bullard told FOX Business on Tuesday.
“The projections are that the economy is going to slow,” he told Maria Bartiromo on “Mornings with Maria.” “I think that’s the right thing to base policy on that, that should be how you plan and you then hope for the best.”
U.S. productivity grew at an annual rate of 2.9 percent in the second quarter, the fastest pace in more than three years. However, Bullard said faster growth would come on better productivity.
“Because the potential growth rate is thought to be only about 2 percent in the U.S. economy – 1 percent productivity growth and 1 percent labor force growth,” he said. “And the demographics we are probably not going to be able to fix anytime soon.”
Although the red-hot tech sector is powering the U.S. economy right now, he said, it’s one area that could see improvement in productivity.
“There’s a good angle on that story because, yeah, you could see productivity improvement given all the fantastic technology that’s around,” Bullard said. “But that technology has to diffuse into actual production processes and make things more productive – I’m not sure that’s always happening,” he explained.
Bartiromo also asked Bullard about President Trump’s disapproval of the Fed’s interest rate hike policy. Bullard said the criticisms don’t question the central bank’s independence.
“Monetary policy in the U.S. is a global 24-hour a day debate that’s going on,” he said. “All kinds of politicians are weighing in, including politicians, senators … members of Congress can all weigh in during hearings, so if the president weighs in, in some ways, it’s just one more voice.”
“He does have influence over the Fed because he has the appointments process,” Bullard added. “I think to the extent he’s going to have influence on the conversations, it’s going to be through those appointments more than through the tweets,” he explained.