BANKING
BANKING
NJBankers Hear “ Positive ” Outlook At Annual Leadership Forum
By Diane C . Walsh Editor , COMMERCE
While the national economic outlook is positive , the chief economist for one of the country ’ s premiere financial service firms warned that pressures continue to be exerted from various sources and the economy is losing momentum .
Lindsey M . Piegza , Ph . D , a managing director at Stifel Financial and a popular guest commentator on national television and radio , gave her overview to the annual economic leadership forum organized by the NJ Bankers Association ( NJBankers ) recently . She expects a “ two-ish ” growth rate this year . The conference of nearly 400 bankers and their associates listened intently to the analysis given by Piegza and Michelle W . Bowman , a member of the Board of Governors of the Federal Reserve System , who delivered the opening remarks .
" Our recent Economic Leadership Forum underscored the positive trajectory of both our National and Local economies . Although there remains work to be done at all levels , our esteemed presenters reiterated the strengthening of our state economy , highlighting New Jersey ' s banks as resilient and indispensable components within the communities they serve ,” said Michael P . Affuso , Esq ., president and CEO of the bankers ’ association .
In Piegza ’ s commentary she warned “ don ’ t fight ” the Federal Reserve System ’ s resistance to lower the key interest rate . In July the central bank set the key rate at 5.25 to 5.50 percent and no change was enacted at its session in January . Piegza said “ there is concern the fed did not raise the rate high enough to return price stability .” Price stability and full employment are the priorities of the central bank in establishing the key rate .
Piegza ’ s assessment reinforced Bowman ’ s remarks . Bowman is a former Kansas state banking commissioner and the first person to fill the community banking seat on the board of governors . The governor noted that inflation is moving down and is currently at the lowest point since 2021 .
Bowman said if the financial conditions were loosened it could re-accelerate inflation . The economist agreed , emphasizing the Federal Reserve ’ s commitment to “ patience and temperance .” The federal reserve governor said she and her colleagues are keeping a close eye on all indicators . Bowman noted inflation is moving down , while economic activity and spending are strong . The unemployment rate remains at 3.7 percent , yet the labor force participation rate has declined , she emphasized . She insisted the key rate “ must be appropriately calibrated to reduce inflation .”
Stifel ’ s economist shared her stance . Piegza understands the investors are disappointed there is no rate cut expected in the second quarter . While there are appropriate conditions for a rate cut , “ we ’ re simply not there yet ,” she said .
Piegza drilled down into the economic drivers , beginning with consumer spending . There is a resilience among consumers due to the labor gains , she said . Yet , she noted several unique characteristics of today ’ s consumers . They have depleted most of the savings accumulated during the pandemic from the stimulus funding . Consequently , they are supplementing their spending with other sources . Piegza noted a rising reliance on intergenerational wealth . She also said withdrawals from 401K plans have increased .
Credit cards are also being used more frequently in today ’ s climate , the economist added . The outstanding balance now hovers at
$ 1.1 trillion . Traditionally , such a surge would be cause for a red flag , but she maintained there is still room to grow . “ There ’ s still a lot of spending and borrowing power ,” she said .
In her analysis , Americans are spending at a slower pace . “ Consumers are recognizing they can ’ t buy everything they want or need each month ,” the economist said , also noting the pandemic craze for goods has now shifted to services and experiences , like vacations .
Turning to the business sector , Piegza said the rising cost of borrowing is triggering layoffs , hiring freezes and curtailing investments . Business is adopting more technology and artificial intelligence ( AI ). While she described the business sector as “ resilient ,” Piegza said 80 percent plan to reduce labor through use of technology and AI .
The housing market will continue to suffer due to the high interest rates causing a “ barrier to entrance ” for first time homeowners and a “ locking effect ” on property owners delays moves because they are unwilling to relinquish their low-interest mortgages . Piegza said the commercial market faces the biggest challenges with more than $ 1 trillion in commercial rate loans coming due in the next 12 to 18 months . The slow return of workers to the downtown urban areas is causing the pain . Furthermore , the landlords ’ angst is extending to secondary and tertiary businesses in the downtowns which are also suffering .
These were the challenges Piegza outlined as she explained the economy remains under pressure . Bowman also addressed the banking industry in her remarks , maintain that mergers and acquisitions continue to be important . She said the focus must remain on the federal regulators and the U . S . Department of Justice with the aim of fairness , transparency , and consistency in all policy reform .
Michael P . Affuso , Esq ., president and CEO of the bankers ’ association
Lindsey M . Piegza , Ph . D , managing director at Stifel Financial
Michelle W . Bowman , member of the Board of Governors of the Federal Reserve System
20 COMMERCE www . commercemagnj . com