On Thursday, Jan. 7, Wisconsin Bankers Association’s President and CEO Rose Oswald Poels and Indiana Bankers Association’s President and CEO Amber Van Til hosted the Midwest Economic Forecast Forum. The virtual event featured Chicago Fed President Charles Evans and Vining Sparks Executive Vice President and Chief Economist Craig Dismuke. Both provided a detailed overview of their expectations for the economy in 2021 and beyond.
The event began with an introduction from the hosts and a moderated Q&A. During Evans’ allotted time, he stated that the second quarter of 2020 had a quick decline, but it has been met with a steady comeback. Unemployment rate at one point hit above 14%, which has now been cut nearly in half at about 6.7%. Even further, he expects this rate to be 5% at the end of the year, which is considerable progress looking at where the year began. This, according to Evans, is a good indicator to judge the national state of where we are.
"With continuations of labor market improvement, unemployment falling to 4% and hopefully below that, it's probably going to be 2024 before we see interest rates start to rise," said Evans, though the median estimate amongst his colleagues is 2023. With that, we can “gently increase the federal funds rate, while it will still be accommodative in order to sort of achieve this overshooting and average 2% (inflation)."
As for Wisconsin and Indiana specifically, Evans believes they will both share in the improvement in the national growth. Part of what he hopes to see as a result is a vibrant labor market, clarity around international trade and longer-term sectoral changes, and continued federal support, which Dismuke added during his presentation is critical for those who have been hardest hit by the pandemic.
“It’s really been a story of diverging outcome,” said Dismuke. “We expect that will persist at least as long as the virus persists.”
During his PowerPoint presentation which addressed his economic outlook on vaccines, stimulus, and recovery, Dismuke looked back on how the pandemic’s impact on the economy took root and what he saw as the bright spots in recovery. He noted that the outlook on residential investment remains strong, interest rates are likely to stay low, and that all the pieces are in place for a strong economic recovery once the virus is contained.
Further forecasts addressed agricultural spending, cryptocurrency expectations, and the economic impacts of the elections. Attendees also had an opportunity to ask speakers pressing questions of their own. Following the event, Evans was asked to share some thoughts on the community banking sector.
“Community banking is competitive,” Evans explained. He spoke on how the banking system has been important for us especially with their efforts with the Paycheck Protection Program. “The state of capital levels is good which is good for community banks.” Yet, it is still a challenging lending environment. There are uncertainties related to commercial which is making it a more difficult lending environment.
“Although they have a lot of opportunities,” summarized Evans. “I’m optimistic.”
To access a recording of the 2021 Midwest Economic Forecast Forum, email email@example.com.