At Fed’s Miami branch, Karen Gilmore has a bird’s-eye view of South Florida’s economy

While much of the country pays close attention to daily political news, the economy remains top of mind as well. The business community is closely keeping tabs on whether the Federal Reserve will raise interest rates again, and if so, when. Already, it has raised short-term interest rates twice in 2017.

In Miami-Dade, some industries that contribute to the area’s service economy are growing at slower rates than others. Leaders in those industries — such as retail and trade — believe the Federal Reserve should be patient and keep rates low. Higher rates make mortgages, credit card debt and auto loans more expensive for consumers.

The Federal Reserve is the government institution responsible for keeping the U.S. banking system running and maintaining a healthy economy. As part of its job to keep the economy strong, a subset of the Fed, known as the Federal Reserve’s Open Market Committee, meets eight times a year to decide whether to adjust interest rates, factoring in inflation and the labor market.

The Fed has been raising rates gradually since December 2015 and has indicated that it plans to stay the course. The Fed also plans to begin to reduce its $4.5 trillion portfolio, composed primarily of mortgage and Treasury bonds — many of which were purchased beginning in 2008 to stave off a complete collapse of the financial system. But exactly when it will begin trimming its balance sheet is uncertain.

Karen Gilmore, vice president and regional executive at the Miami branch of the Federal Reserve Bank of Atlanta, channels information about the local economy up the chain, and the data are factored in as decisions affecting the entire nation are made.

In a recent conversation with the Miami Herald, Gilmore shared her insight on the national economic environment, the state of the Florida economy and how the Fed works, and some of the economic and financial education programs that are underway.

Q: How does the local economy factor into the macroeconomics of how the Fed adjusts interest rates?

A: If you consider the tri-county area of Miami-Dade, Broward and Palm Beach as the “local” economy, it is one of the largest Metropolitan Statistical Areas (MSA) in the country. It is a significant economic engine, but it is also a unique economy. There are things that happen here that are South Florida-centric.

But there also are trends in employment and other aspects of our local economy that may have some influence on the national data and find its way into policy discussion, which then may find its way into policy decisions.

Part of my role is to gather valuable real-time information about what businesses in South Florida are experiencing and thinking. That information can support or add insight to the data and analysis the economists prepare, all to help create the national and regional picture that President [Raphael W.] Bostic, the president of the Atlanta Reserve Bank, takes to the Federal Open Market Committee meetings.

Q. Do you get a lot of feedback locally from the business community on how interest rates are affecting specific industries such as real estate and hospitality?

A: When I am meeting with industry executives, we do talk about the interest-rate environment and what influence it may have on their businesses. Those influences can manifest themselves in different ways depending on the industry and the business. In today’s environment, business executives still find the interest rate environment to be favorable.

Q. How does the fact that South Florida is so dependent on foreign investment influence Fed policies?

A: When policymakers think about policy direction, it is with the macro economy in mind. A condition such as the strong foreign investment influence in South Florida is a more geographic centric issue and the flow of money by foreign investors into our economy is going to have an influence on policy only to the extent that it has a more macro national impact.

Q: What has been the most interesting part of your job?

A: I have spent my entire career being public-facing, and this role certainly builds on that and I enjoy it.

But what I have found to be the most interesting aspect of the job is working with the Atlanta-based economic team. It has been such an interesting experience being involved in their analysis of current data, their forecasts based on the data and then having an opportunity to bring into the discussion what is happening in the real economy from the perspective of business and seeing how that influences the discussions and decisions — at least at the Atlanta Bank.

Q: How does the current political environment impact the Fed and its policies and decisions?

A: The Federal Reserve is nonpolitical and does not comment on policy discussions. Although public policy actions can find their way into the economy, and ultimately manifest in the data at some point in time, it’s just not part of the calculus on how we go about our business every day. I would characterize the Federal Reserve as very mission-focused.

Q: Are you in Miami full time? What was your path to your current position? Were you appointed, and if so, by whom?

A: Yes, I have lived in Miami for 40 years. I spent the last 20 years-plus of my banking career in senior leadership roles in lending and risk management. I thought I was retiring — young. But with the recession and the impact that it had on the banks and the debt markets, I ended up doing quite a bit of consulting.

In the fall of 2014, I was contacted by the Atlanta Federal Reserve to consider this position. It sounded like an interesting role, so one thing led to another, and here I am. It is not an appointed position.

Q: How does your perspective differ from the people in your position in the Midwest or other parts of the country?

A: I really can’t answer this, since most of my work is at the Atlanta Bank level and not at the system level, so I have less of an opportunity to interact with others in different parts of the country on various topics.

Q: Are you satisfied with what you are seeing in terms of job growth in Florida?

A: South Florida is reflective of the strong job growth nationally. What employers tell me is they are challenged to find skilled employees in various fields.

And, the data reflects that the cost of living in South Florida is high relative to the average median salary. Employers trying to attract new talent may find that the cost of living and other urban growth related issues could be an impediment.

South Florida has a solid job market, but it is not without its challenges.

Q. What are the economic and financial education programs that you oversee? It appears you have an interest in economic education. Is that a passion or part of the job description?

A: Having been in banking so long, I don’t know if it is a passion or just innate. I remember teaching my daughter how to figure out what 10 percent, or whatever the sales discount was off the cost of something in the store, when she was 6 or 7. I also remember opening a savings account with her about that same time. I think it is valuable that kids start out young with concepts that can be incredibly important to them later.

In Miami, I have an outstanding economic education program manager, who was a former teacher, and she has developed and implemented incredible programs for teachers and students. Throughout the Federal Reserve System, we have outstanding resources to facilitate financial literacy.

In Miami, we have developed some valuable partnerships with various school systems, Miami Dade College and the Florida Council for Economic Education, to name just a few. We had over 4,000 students participate in our Tour & Museum Program at the Miami Branch last year, which provides an opportunity for students to learn more about the country’s central bank.

In addition to financial literacy and personal finance programs for teachers and students, we coordinate other programs such as our job-shadow day where we provide students through the Miami-Dade Public Schools’ Academy of Finance an opportunity to participate in résumé building, interviewing and other programs to enhance their employability skills.

Q: What is the process the Fed goes through to select people to sit on its board? If someone wanted to be considered, how would he or she go about it?

A: We have a board of directors for each of our branches and at the district bank level. In the Atlanta Bank, we have five branches. The selection process is thoughtful and, candidly, somewhat rigorous.

Because our board directors are an important link to the regional business community, we aim for diversification in our board compositions. Diversity includes both race and gender but also industry. We want a broad range of business sectors and consider such things as company employment size, the footprint of their business, and what prospectively they can add to our knowledge about what is going on in the economy currently and their visibility into the future.

Part of my role is to identify prospective board members based on what we feel best suits what we might be looking for at any given time. It is a dynamic process.

This story was originally published September 3, 2017 at 4:00 PM with the headline "At Fed’s Miami branch, Karen Gilmore has a bird’s-eye view of South Florida’s economy."