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News — Cris deRitis' remarks to the(SERC) Advisory Council included an impeccably detailed analysis of the economy, highlighting successes and potential pitfalls. The deputy chief economist at Moody’s Analytics spoke to the group on the meeting’s first day, Nov. 13, 2024, in Washington, D.C., and was the keynote speaker at the event’s reception and dinner.

The economy remains strong, thanks in part to record employment. deRitis told thethe U.S. pulled off a miracle of sorts and “the Fed deserves some credit in terms of steadying inflation from a 9% rate back down to near the target, without triggering a recession. This is clearly an example of American exceptionalism.” He expects we’ll see one or two 25 basis point interest rate cuts in 2025, supporting economic activity and making borrowing easier for consumers and cheaper for businesses.”

Consumer spending is elevated and entrepreneurship is on the rise. “An odd thing happened during the pandemic. We had a lot of small business formation,” said deRitis. “I see this as a real engine of growth going forward. Small businesses are responsible for a lot of jobs; they also account for significant productivity growth.” The Moody’s executive is confident this growth is the silver bullet that could solve many of the economy’s problems, but entrepreneurship has to remain high to achieve it. 

When it comes to consumer balance sheets deRitis sees one major blemish—credit card delinquency. It’s on the uptick and unlike the federal funds rate, which the Federal Reserve has been steadily reducing, interest rates on credit cards are at historic highs. And, credit card defaults are at their highest level in over a decade.

Moody’s Analytics thinks about threats to the economy through the lens of a risk matrix and deRitis said he’s concerned the Fed may misstep. The central bank may keep interest rates too high for too long and cause a recession or cut them too aggressively, causing inflation to pick up again. He worries about how geopolitics could affect the energy market. “Given what’s going on in the Middle East and the ongoing conflict in Russia and Ukraine, there’s a risk that oil prices could spike.” Another risk is the stock market. If we were to see stock prices correct and crash, that could have some real negative consequences, said deRitis. “If it’s short-term, then it’s probably not much of a problem. If it’s long-term there will be macroeconomic consequences.”

This insight from one of the top economists at the foremost firm for providing solutions for measuring and managing financial risk aligns with SERC’s mission and moves it forward. The consortium connects Smith students who are interested in risk management with the leadership of powerhouse industries in the field.

It also provides thought leadership, education and outreach to industry and government organizations. “The Smith Enterprise Risk Consortium is unique among academic institutions in building a network of industry and government risk practitioners, as represented by the composition of our Advisory Council which is composed of C-level risk executives from a wide range of industries,” said SERC Director and Professor of the Practice Cliff Rossi. “Elevating the risk management capabilities of these organizations by connecting our world-renowned faculty to industry leaders is an essential part of SERC’s mission.”