The U.S. economic recovery likely will continue through 2018, with annual growth of about 3 percent, the top economist for Citigroup said during a visit to Penn State Erie, The Behrend College.
Interest rates also will climb, Willem H. Buiter said.
“There’s likely to be another year of noise and turmoil,” Buiter told an overflow crowd at the Sam and Irene Black School of Business on Feb. 6. “But we are slowly extricating ourselves from this extraordinary period of monetary easing.”
Low interest rates and a bailout of the U.S. financial system helped stabilize U.S. markets after the housing bubble burst, said Buiter, a former member of the Monetary Policy Committee for the Bank of England and former chief economist and special counselor to the president for the European Bank for Reconstruction and Development. It’s also possible, however, that the economy simply hit bottom, and some recovery was inevitable.
“Recoveries happen, even if you do nothing to encourage them,” Buiter said. “There are innate forces that support that. We had business cycles – upswings, as well as downturns – long before we had economic policies to manage them.”
The global scope of this recession, which began in late 2007, has complicated the recovery effort. High unemployment and austerity policies led to street protests in Iceland, Latvia, Lithuania and Greece. The Irish Stock Exchange fell to its lowest level since 1995.
Emerging markets have yet to recover, said Buiter, whose talk at Penn State Behrend was part of the Society of Undergraduate Economists’ Speaker Series. And in the U.S., the gap in income inequality – the rally cry of the Occupy movement – has widened: The “haves” have more than ever, and the rest have less.
“The center has been hollowed out,” Buiter said. “We all know that.”
The political squabbling in Washington hasn’t helped. “The U.S. has never been as polarized as it is now,” Buiter said. “These silly events, such as the brinkmanship with the debt ceiling, only create greater insecurity.”