Economy looks solid, head of Philly Fed says

Anthony Santomero, president of the Federal Reserve Bank of Philadelphia

4:18 p.m., April 14, 2005--Anthony Santomero, president of the Federal Reserve Bank of Philadelphia, gave a hopeful financial report in his lecture, “A Policymaker’s Reflections on the Recent Business Cycle,” Tuesday evening, April 12, at UD’s Smith Hall.

Addressing an audience of approximately 300 students, professors and local financial officers, the guest speaker at this year’s Hutchinson Lecture said that, although the early years of the new millennium presented challenges, the roller-coaster ride of recession and recovery have passed and 2005 has ushered in a period of what appears to be continued expansion and growth.

“As you all appreciate, it is important that we learn from the experience of the past,” Santomero said, “so I welcome the opportunity to review the recent business cycle and examine it in some detail.”

In his lecture, which included five examples of lessons learned from recent real-world financial shifts, Santomero discussed the way events in the past decade have affected the global economy and explained how monetary policies have been affected. He also addressed how he sees the economic expansion progressing and how stumbling blocks have created sturdier economic footing.

Touching on the shocks to the economy following the 9/11 terrorist attacks, Santomero made the point that, while uncertainty still remains and is inevitable, the “economy has entered an expansion phase that I expect will carry us forward for some time.

“As the economy moves along its path of self-sustaining growth,” Santomero said, “the Federal Reserve is steadily removing the accommodative monetary policy that has been in place over the past few years and is moving toward a more neutral policy stance.

“Nonetheless,” he cautioned, “I must remind you that every business cycle is different. Each is the product of a relentlessly evolving economic structure, surprising new developments and a sequence of policy actions attempting to stabilize the situation. This most recent cycle is no exception.”

Santomero went on to outline the way changes in technology and globalization continue to buffet the economy before concluding his lecture on an upbeat note.

“I realize that no matter how much we learn, the central bank’s power will always be limited,” he said, “and I do not think we will ever reach a point where we will eliminate the business cycle. But, we may be able to move closer to conducting optimal monetary policy in a world where change is relentless and surprising new developments continue to unfold.”

Santomero was appointed the ninth president of the Federal Reserve Bank of Philadelphia in 2000 and previously served as the Richard K. Mellon Professor of Finance at the Wharton School at the University of Pennsylvania.

He serves on the Visiting Committee for UD’s Alfred Lerner College of Business and Economics, the advisory boards of the Wharton Financial Institutions Center and the Penn Institute for Economic Research and Drexel University’s board of trustees.

The annual Hutchinson Lecture, which each year features a prominent economist, is sponsored by UD’s Department of Economics in the Alfred Lerner College of Business and Economics. It was established in 1990 to honor Harry D. Hutchinson, professor emeritus of economics who, after a distinguished 30-year career at UD, retired in 1989.

Article by Becca Hutchinson
Photo by Duane Perry

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