(Bloomberg) -- The U.S. economy should continue to grow at a healthy pace despite emerging geopolitical risks and extended weakness in manufacturing, Federal Reserve Bank of Chicago President Charles Evans said.
“The current, overnight events in Iraq I think are certainly a question mark, and oil prices are up a little bit, but I think we’ve got a pretty good, robust, resilient economy,” Evans said Friday in a Bloomberg Television interview from an economic conference in San Diego.
Stocks fell Friday following news that the U.S. had killed a top Iranian general in an airstrike in Baghdad, escalating tensions in the Middle East and sending oil prices soaring. In the U.S., a widely-followed gauge of business activity in the manufacturing sector published Friday unexpectedly dropped to the lowest level since 2009, signaling a worsening contraction.
“I think we’ve found that the economy can continue to grow even when manufacturing is contracting just a little bit, so I’m hopeful that we’ve got a really resilient economy at the moment,” said Evans, who supported all three Fed interest-rate cuts in 2019 but doesn’t hold a policy vote in 2020.
The U.S. unemployment rate ticked down to 3.5% in November, matching a half-century low, and has spent most of the last two years below 4%. Yet inflation remains below the Fed’s 2% target, as it’s been throughout most of the last decade, a development that’s confounded policy makers who expected a tighter job market would put more upward pressure on consumer prices.
Evans also reiterated his call for keeping interest rates low for long enough to drive inflation above the Fed’s target.
“I think at this point in the cycle we really need to get inflation up to 2%, and above 2% somewhat,” Evans said.
Richmond Fed President Thomas Barkin earlier said in a speech in Baltimore that while an escalation of tensions with Iran was among the factors that could upset the long U.S. expansion, the U.S. economy looks “quite healthy.”