The Federal Reserve Board will hold interest rates low for a longer period than most Americans are predicting and the U.S. economy will grow faster than expected over the next 12 months as a result, a prominent economist said in Des Moines last week.

Speaking to hundreds of attendees at Wells Fargo & Co.’s annual Economic Trends Forecast, Wayne Angell, a former chief economist of Bear, Stearns & Co. and member of the Board of Governors of the Federal Reserve, said that corporate profits would continue to rise next year and that he was buying stocks because he thought the stock market will climb higher next year.

“I am long in the stock market because I think corporate profits will be well-behaved,” he said. “The economy is going to do better than many expect because the Fed has said it will keep (interest) rates low for a considerable length of time.”

The tax cuts championed by President George Bush are working to stimulate the economy because people have used the proceeds to pay off credit card and other debt and have been freed up to spend more money, said Angell, founder of Arlington, Va.-based Angell Economics.

Inflation should be kept in check by what Angell characterized as a worldwide deflation in the cost of products. Countries around the world are increasingly turning to manufacturing to lift their economies. As more products flood the marketplace, prices tend to drop over time, he said.

At the same time, worker productivity is rising, and that means that unemployment won’t drop as quickly as some would hope. Angell said he expects the nation’s unemployment rate to fall to between 5.5 percent and 5.8 percent a year from now.

Federal Reserve Board Chairman Alan Greenspan has used low interest rates to spur the economy, first in the housing sector and later in the stock market, Angell said. With typical money market funds paying around 1 percent interest, investors are encouraged to risk their money in other places, including stocks and bonds, that pay higher returns.

Born in 1930 in Kansas, Wayne Angell earned a bachelor of arts degree from Ottawa University in Ottawa, Kan. in 1952. A year later he had finished a master’s degree at the University of Kansas and taken a job as an economics professor there. He completed a Ph.D. in 1957.

Since then, he has worked as a professor and dean. He served two terms as director of the Federal Reserve Bank in Kansas City and three terms as a Republican in the Kansas State House of Representatives.

For Iowa, Angell said after his prepared remarks that the state needs to focus on issues that are facing an aging population, including tax structures and the added costs or growing older.

“Iowa’s got to consider its older population,” Angell said. “You don’t want some Iowan to move to Las Vegas because of the tax rates.”

In addition, he said Iowa needed to balance its desire to spend money on education, especially its colleges and universities, with other programs that need funding. Using education as a way to develop the state is tricky because, “if you provide the best education, there’s no guarantee they (students) will stay (in the state),” he said.

GRISWELL SPEAKS OUT

Principal Financial Group Inc. Chairman and Chief Executive J. Barry Griswell told hundreds of attendees to Wells Fargo & Co.’s annual economic trends luncheon that Iowa needs to change as the pressures from globalization mount.

“We really do live in a state that is geared for rural life,” he said. “Our system isn’t built for the kinds of things that we’re dealing with.”

Across the country, there are movements to create a national charter for insurers and banks, streamlining a system that now requires companies to work with regulators in each state. In Iowa, there is a need for “strong, vocal types,” Griswell said.

The consolidation taking place in the financial services industry is one example in which competition is forcing companies to move more quickly and boldly when it comes to marketing, technology and other issues.

“Iowa has to be prepared to play in this company a little differently than in the past,” Griswell said. “Our tax base, and the way we operate our government has to change.”