Outgoing Atlanta Fed President Raphael Bostic tells Bloomberg’s Michael McKee that it’s ‘paramount’ for the Fed to get inflation back to its 2% target. In a wide-ranging interview, Bostic also discusses the argument of so-called ‘mission creep’ at the Fed, Kevin Warsh’s nomination as Fed Chair, and the K-shaped economy.
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Questions asked in this interview
10
0:12I want to ask you, as you travel around your district for the past year, what's the mood like among companies and consumers?
1:13Well, what do you think that means for the economy?
1:56Does any of that—you don't have another meeting to vote at, but does any of that give you pause about the Fed pausing at this point?
3:39Since then, what have you learned about the economy and about inflation?
4:47Do you think the economy is becoming more K-shaped?
5:35In your district, do you hear people raising questions about that?
I want to ask you, as you travel around your district for the past year, what's the mood like among companies and consumers? We've seen the surveys show that people are getting very, very pessimistic.
Well, I'd say it runs in two ways. So, first of all, what has been true throughout the last year is a tremendous amount of resilience on the part of businesses and consumers. You know, April 2nd, when the tariffs were announced at very high levels, that put everyone back on their heels and there was a lot of uncertainty. And what's happened through the year is, people have figured out ways to deal with that uncertainty. So as for today, I think most businesses and most households are not thinking that the worst of the possible outcomes are going to happen. They're not sure they can get to the best ones. But everyone's trying to find a state where they can get through. So I think the sentiment is one of cautious optimism. But I put emphasis on the cautious as opposed to the optimistic. I think people are really trying to wait and see what happens.
Well, I think it means that what we've seen for the second half of 2025, we will continue to see through 2026. And, you know, I talked to a lot of folks in the last six weeks or so, and they said, we think our experiences in October, November and December. And then there are some reasons why they think it might actually get stronger. You know, the tariffs, people have gotten used to those. And so those effects will have run through by the middle of the year. We see some of the stimulative aspects of the tax bill last summer, those will be coming on board. And if consumers start to feel like there is more certainty, then I think businesses think there's some upside potential in the economy.
Well, this last week, we've gotten a lot of bad news on the employment front with ADP and Challenger and the other numbers that have come out. Does any of that—you don't have another meeting to vote at, but does any of that give you pause about the Fed pausing at this point?
For me, no. You know, I think we've been in a situation where inflation has been too high for too long. And by many readings, it's been, kind of, marking time, has been at a plateau well above our target for the better part of two years. That's not acceptable. And for me, I think we can't lose sight of the fact that the labor market is very turbulent right now and some of it is because there's some big structural things that are happening in the economy. When I talk to businesses, they're reluctant to hire entry level people at the same rate that they did before because they think that things like AI can replace that and they can deploy resources for other things. And I'm hearing that kind of reticence. There's also the reality that during the pandemic, a lot of companies ramped up because the demand ramped up and they've been slower to right-size. We see a bunch of that right-sizing happening as well. And then we have issues around the labor supply and whether the immigration shifts are going to be temporary or permanent. And if they're permanent, then we're going to have a lower, steady state of job creation. So, for all those reasons, I think it's very hard to make a clear statement. And then, of course, we don't have a jobs number today. So we're not getting the data in a timely basis. My team tells me it'll be April or May before we start to be able to draw clear signals from the data to really understand what's going on.
Yeah, we want to wish you a happy non-jobs day today. You started a long and varied career at the Fed in 1995. Since then, what have you learned about the economy and about inflation?
Well, I think for the economy, one thing that is true is that it is a very complex economy, it's very large. And to understand it, you really have to get out and see all parts of it. And one of the things that's been great in my role here is I've had a chance to do that. I think it's given me a deeper understanding of just how people engage and experience the economy and how they make decisions to move it forward. In terms of inflation, what I've learned is that we really don't want to have inflation. Once inflation gets entrenched in people's minds, it changes how the economy evolves. And it's one of the reasons why we need to keep our policy in a restrictive posture so that we get inflation back to 2%. That's paramount. High prices and the prospect of rising prices really do have a lot of families on the edge. And I mean, you all have reported a lot about the K-shaped economy. There are lots of families that are feeling very precarious right now, and that's a source of concern.
