The U.S. is headed for a period of “four or five years” of sustained economic growth, Treasury Secretary Steven Mnuchin told “Fox News Sunday.”
On Friday, the Commerce Department released a long-awaited estimate stating that the U.S. economy grew by 4.1 percent in the second quarter of 2018, marking the fastest economic expansion in nearly four years.
But that “terrific quarter” might just be the tip of the iceberg, Mnuchin said.
“We can only project a couple of years into the future, but I think we’re well on this path for several years, so I don’t think this is a one- or two-year phenomenon,” Mnuchin said. “I think we definitely are in a period of four or five years of sustained 3 percent growth at least.”
Asked whether it would be responsible for the Federal Reserve to raise interest rates in response to the economic growth — which some analysts have cautioned may be premature, if the GDP surge is only temporary — Mnuchin said inflation would justify the move.
“I think it is and the market expects it,” he told host Chris Wallace. “The Fed has been targeting 2 percent inflation, and obviously with 2 percent inflation, we have to have at least slightly higher interest rates to manage through that.”
Both President Trump and Vice President Pence have suggested that raising interest rates may undermine some of the administration’s progress on the economy, but Mnuchin said the president “absolutely respects the independence of the Fed.”
Friday’s high numbers were driven in part by increased consumer spending, which makes up more than two-thirds of GDP, fueled by tax cuts and low unemployment — as well as boosted exports and government spending.
But some observers cautioned that some of the GDP growth reported by the Commerce Department can be attributed to a surge in soybean and other exports, as international buyers purchased the goods ahead of the expected implementation of bruising retaliatory tariffs. Last month, The Trump administration announced $50 billion in tariffs on Chinese goods for the country’s “unfair trade practice” involving intellectual property, and China responded by promising $50 billion in tariffs on U.S. goods, including soybeans.
That would suggest that this quarter’s GDP gains might be short-lived. The economy saw a comparatively slight 2.2 percent increase in the first quarter of this year.
However, Mnuchin echoed the remarks last week by White House economic adviser Larry Kudlow, who told reporters Friday that they believe the growth is “sustainable” and the report does not reflect a “one-shot” surge.
Mnuchin also said that the recent dive in Facebook’s stock shouldn’t cause undue alarm, because the markets on the whole are overperforming.
“I’m not concerned about this at all, and again, investors should have diversified portfolios,” Mnuchin said. “Tech stocks have obviously had an incredible run and you look at the NASDAQ, the S&P, you look at the DOW — the markets are obviously doing very well.”