Local experts give their take of Fed chief's comments

The Daily Herald asked three area economic experts to respond to Chicago Federal Reserve Bank President Charles Evans comments Monday. Here is their take:

Janna Sampson, of Lisle, is a founding partner of OakBrook Investments, with $1.3 billion under management

Michael Miller is former economics department chair and current associate professor at DePaul University

David J. Klein is a financial consultant for RBC Wealth Management in Vernon Hills>

Here is their take:

Q. Evans believes the skyrocketing cost of gas and food may not spark significant inflation and further drag down the overall economy Do you agree?

Sampson: "He appears less worried about commodity costs and energy prices than I would be and than I think the market is. It remains to be seen whether (the Federal Reserve) can successfully navigate this over the next 12 months or whether we are back into the mid to late 1970s (of stagflation). A lot of people are looking back at the 1970s and wondering if there isn't a bigger risk of that than the successful landings of the early 1990s (recession). "

Miller: "I think he is right. An increase in price can occur because something is either temporarily or permanently scarce. If we have a few good crops, the price for food should stabilize. The same may be true for oil. Given the value of the dollar, it seems like this is not a permanent oil price. This is a temporary crisis in price. As some exploration occurs, you may see oil prices begin to stabilize."

Klein: "Inflation is a major concern. The bottom-line answer is … it should be on everyone's mind at this point because of the high commodity prices. But I think Charles Evans' remarks are pretty much in line with economic thinking, really. "

Q: Evans said the current economic outlook is "sluggish" for the next six months. What is your view of that statement?

Sampson: "The most notable thing here that I would say is that he is not calling for a recession of any kind. He is looking for weak growth, but not negative growth and without negative growth, you don't have a recession. So, he is looking for weak growth, but nonetheless, it is growth."

Miller: "He wants everyone to be aware that we have begun to fight this problem. But it will not end overnight. (On the "sluggish" statement,) I would say he is probably correct."

Klein: "The bottom line is really that the Chicago Fed is still looking for continued weakness in what they call the real (gross domestic product), which is after inflation. I think this depiction is pretty much in line with what many economists are saying right now."

Q: Evans said he believes the economy could return to growth in 2009, with a GDP up to 2.5 percent. Is the end really so near?

Sampson: "That is probably reasonable … If what he sees comes to pass, particularly on the energy commodity prices, I think there is every hope that in the second half of '09, we will be there. If he is wrong on the commodity price front, there may be more pain to come."

Miller: "Yes. I think it will. I think the economy is resilient. It has shown us that over the last couple of business cycles."

Klein: "If you have 2.5 percent growth, that is what we call a 'Goldilocks economy' -- not too hot and not too cold. I would love to see that. I hope he is right when he says inflation will moderate in the medium term."