Business/Economy

Alaska shouldn't fear a rate hike by the central bank, says Fed regional president

John Williams, the president of the Federal Reserve Bank of San Francisco, said Wednesday he recognizes Alaska's economy is in challenging times, but not so much the state would suffer should the Fed hike interest rates, a move he supports.

Williams, who is in Alaska this week to speak with leaders from business, government and academia, said the U.S. economy appears strong enough in terms of jobs, inflation and other indicators that he thinks the Fed should intervene soon, on a gradual basis, to prevent overheating.

Alaska's economy is often out of step with the rest of the country. The disconnect was something of a blessing during the Great Recession, which Alaska weathered rather well. But while growth now is picking up in much of the U.S., the same cannot be said for Alaska.

"I think it's always one of these challenging parts of the story," Williams said in an interview with Alaska Dispatch News. "There is never a time when all parts of the economy are doing equally well."

The state has the highest unemployment rate in the country. Seasonally adjusted unemployment for June was 6.7 percent in Alaska, while the national rate was 4.9 percent, according to preliminary numbers from the state Department of Labor.

Still, the interest rate set by the Fed is only one of a host of factors that affect Alaska's economy. Others, including government spending, commodities pricing and activity in the oil patch, have a far more visible effect on jobs and growth.

"If we are talking about interest rate hikes of a quarter percentage point, gradually over the next couple of years, from Alaska's point of view, I just don't think it will have a big impact," Williams said.

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Whether a rate increase will happen this year is an open question, based on the minutes from the Fed's July meeting. Not all members of the Board of Governors are as supportive of a rate increase as Williams is. And while he can influence the conversation, he is not in the voting rotation this year.

Williams is one of the institution's 12 regional bank presidents and his district, comprised of nine Western states, accounts for about 20 percent of the U.S. economy. Predecessor Janet Yellen is chair of the Federal Reserve.

He is in Alaska on a reconnaissance trip of sorts to learn about the state's economy and put what his spokesperson called "a human face" on the Federal Reserve, whose most high-profile function is to keep jobs and inflation at healthy levels through the setting of interest rates.

He plans to meet with the economic advisor to Gov. Bill Walker, local leaders in Anchorage and Kodiak, the heads of Alaska Native corporations and students and faculty at the University of Alaska Anchorage, but has no formal plans to meet with oil industry executives.

Williams will be speaking Thursday at a luncheon sponsored by the Anchorage Economic Development Corp.

"It's a part of the district that we haven't visited for some time is probably a key driver," said spokesperson Matthew Schiffgens in explaining the reason for the visit. "He also really believes it's important to put the human face on the institution, so his public speaking engagements give him the opportunity to accomplish that."

 

Jeannette Lee Falsey

Jeannette Lee Falsey is a former reporter for Alaska Dispatch News. She left the ADN in 2017.

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