Top Producer Summit 2026: Raphael Bostic provides an economic outlook

Thank you. It's good to see you.

Well, first of all, good afternoon. It's good to see you all. Welcome to the sixth district. It's good to have this conference here in part of my district. You asked the question in two ways. I'll talk to the second one first. You know the Federal Reserve is the US central bank. We are charged with a dual mandate. Stable prices, that's the inflation part. Maximum employment is the other part. And our charge is actually to create a foundation so that the economy can proceed and grow in a predictable way. So that for families, for businesses, for farmers like yourselves, you can invest for the long haul with some confidence about where the economy will be when those investments come to fruition. In order to do that, it requires us really to have that longer term horizon in terms of thinking about where our impacts lie and how it plays out. And to have that kind of extended arc for our policy, we need to be able to be patient. And what I think all of you know is that many others have much shorter time horizons. They want decisions or policies that are going to help in the short run. But you also know that an investment for a one-year horizon is not always the best investment if you're thinking on a 10-year horizon. And so we're in an environment where the independence of our institution allows us to think in that longer horizon and to be disjointed or separated from sort of the ebbs and flows of the world as it happens. And I don't have to tell you all the world has been a lot of ebb and flow that has been going on recently and so that's the important part. So for us to do our job well having that arm's length and the ability to do things over a longer horizon and think over a longer horizon is quite important. Now you ask do I have qualms? I will say I've been in this role for almost 10 years and every central banker, every one of my colleagues as I've talked to, they take the job understanding what the task is and we have collectively really tried to be as true to that as possible and I don't think that that is likely to change moving forward. The pressures are going to be what they are. I tell people like if you're going to take this job, you should expect to be yelled at all the time. People are going to have their own views. And that's okay and they should be free to tell us. We can take that on board, but ultimately we have to do what's true for our institution.

Let me speak more generally about the US economy. So this economy has continued to be resilient at the aggregate level at ways that I don't think many analysts had anticipated. There was a time I'd go around and give business talks and the first question would always be what are you doing with interest rates? The second question was always when's the recession coming? And I don't get that question anymore. I think people have gotten their heads around the idea that this economy has continued to perform well at an aggregate level. Consumers have continued to be resilient. And that's a good thing. And my outlook is that that resilience that we've seen for much of 2025 will continue into 2026, might even get a bit stronger. And so we might actually see some of the tax benefits, some of the deregulation, those things could actually spur the economy to do even more than what it did last year. And those are all positive things. That's one reason. But that extra strength actually puts upward pressure potentially on prices. And since our inflation is already too high, I want to make sure that it is back on track to our 2% target before we do dramatically more in terms of moving our policy to a more neutral stance. Now, you asked about the labor market. The labor market is producing fewer jobs in the US on a monthly basis than it has historically. Historically the break-even level has been somewhere like 120 and 150,000 jobs in a month. These last several six months or so we've been averaging something like somewhere between 30 and 60,000 jobs a month which is far less. Now the question is what do you make of that? And I think it's hard to know like on one level usually when you see job growth start to slow down it's because there's been a drop in demand for product. When I go around I talk to businesses they don't tell me that they're worried about being able to sell the number of goods that they are producing. The demand has remained solid for the most part. And so that's one thing. A second thing that businesses tell me is there's so much uncertainty out there, political uncertainty, geopolitical uncertainty, policy uncertainty that they've been largely reluctant to do anything too bold in terms of hiring because they don't know what's going to happen. And until they do, until they have a strategy or a plan that they think can sustain, they don't want to get too far out ahead. And that's one reason why you might see expect to see the number to be lower. And then there's a third category of issues in the labor market around the question of whether there are just fundamentally new things happening in terms of how production is happening such that businesses can produce the same amount of product with fewer people. So you think about AI for example and those technologies businesses are experimenting with ways to have AI introduced into their production processes to allow productivity that doesn't require people. And so you may have heard reports about a lot of entry-level hiring has happened at a much lower pace than it has in previous years. And a lot of that is because the promise of AI has folks thinking, well, maybe I don't need to do those hires and I can get that same amount of productivity. That's a structural change. And if we want to make sure we do our policy right we need to understand whether a number is a good number, a bad number, or an in-between number and if you have structural changes that's an evolution that's actually a transformation that makes it hard to know that for sure and so until you know I want to again be cautious I don't want to jump too boldly in any direction I think it's prudent for us to wait and make sure we understand what these numbers actually represent in terms of the strength of the economy and the labor market. So for me, I do think that we're in a transitional period and we have the luxury of being patient because the economy is so resilient. Let me say one other thing because you mentioned the jobs report that's coming out late. The government shutdown actually prevented a lot of data from being produced and so it actually is going to make the numbers a bit choppier in the next several months. So the usual signals we would get from those are actually going to be weaker than they would be otherwise. And for me that's even another reason why I think we want to be cautious. We want to be patient and I think that'll be prudent.

So, we may want to turn this around and ask the folks in the audience this question. I would say this, I talk to a lot of farmers. We have an agriculture advisory council that we meet with on a regular basis. And what they tell me is that it's hard out there right now for farmers. I think cattle is an exception. Pricing has been strong there. But outside of that there are real questions as to whether historical business models are going to be able to sustain in the challenging environment. We know that input prices for a host of products are up. We know that competition at a global level is up. We know that the tariffs have put tremendous pressure on the competitiveness of American products overseas because of those dynamics. And we also know that many commodity prices haven't changed to offset these things. And so these are all incredibly challenging dynamics to wrestle with and how we move forward is really an open question. So I do think there's a significant crisis here. And particularly I get to talk to a lot of smaller family farms. And I worry about them especially because the big operations, they are so large scale gives you a diversity of possible strategies. You can tap into different types of credit that can allow you to weather volatility a bit more readily. And we don't see that for a lot of the smaller folks. It's actually true even for just small businesses more generally. We do national surveys of small businesses, national surveys of businesses and one thing that we've seen over 2025 starting in 2024 is a split in sentiment where the big companies, the big firms, they were optimistic, they felt like they had strategies that could really get through whatever was going to come at them. And we saw a decidedly negative turn in the sentiment for small businesses that don't have those alternative approaches. So this is actually a more general thing.

Nothing falls between the cracks. Right. So we don't let that happen. I would say this is a really complicated issue because when you think about the marketplace, you have two sides. You actually have the producer side, but also the consumer side. And one thing that we've heard from many families and households is that high prices are a problem. And if the prices stay high then they're not going to buy a lot of goods, they're not going to buy a lot of product and many of the products that you all are trying to sell are going to be trade-off products. We see many consumers, when I think about the US economy today I talk about the aggregate but what is also true is that there are very few people who live the average number. You have a bunch of people who are doing really really well and then you have a bunch of other people who are kind of precarious, kind of paycheck to paycheck, week to week just trying to get by. And what we've seen over the last two years or so is an increase in the share of the population that's in that second category. And so when I think about prices and our policy role in prices, if we get inflation back down to 2%, that precariousness eases in a way that allows everything else to start to flow. And right now our inflation is in the upper twos. We're trying to get to two. And I'll tell you before the pandemic we were at like 1.7 and people said the Fed is not doing their job right. So if 3/10 away is too far, 9/10 is way too far. So we've got to get that under control. If we get that under control and the sooner we can do that the better then I think it will start to resolve a bunch of other issues because everybody will be able to look forward with optimism.

I think it's probably more a sign of productive investment. But it's really just a small part of a larger story in the sense that, being able to buy that equipment that's become more expensive allows you to keep doing the things that you're doing. But if commodity prices don't change enough, if the competition doesn't change enough, there's still going to be hardship. So I'm very heartened by that and I talked to a bunch of lenders. They do feel like that market is loosening, is easing for them and they're able to do more and have more activity. That's one cog of a large machine that needs to make sure that we need all of them to run. So I do think it's positive. But I think the folks who I'm talking to don't think that that's enough and they really do want to see some significant changes in how some of these markets are functioning.