Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Good morning.
Speaker 3: I'm Michael McKee, the international economics and policy correspondent for Bloomberg,
Speaker 3: and we are here in Atlanta. Welcome to all of
Speaker 3: our viewers and listeners around the world on Bloomberg Television
Speaker 3: and Radio. We're speaking with the Atlanta Fed President, Rafael Bostik,
Speaker 3: who is retiring at the end of this month. So
Speaker 3: this is sort of your HR exit exit interview.
Speaker 1: Mike, it's always good to see you.
Speaker 3: I want to ask you, as you travel around your
Speaker 3: district for the past year, what's the mood like among
Speaker 3: companies and consumers. We've seen the surveys show that people
Speaker 3: are getting very, very pessimistic.
Speaker 1: Well, I'd say it runs in two ways.
Speaker 4: So, first of all, what has been true throughout the
Speaker 4: last year is a tremendous amount of resilience on the
Speaker 4: part of both.
Speaker 1: But this is and consumers.
Speaker 4: You know, April second, when ther were announced at very
Speaker 4: high levels. That put everyone back on their heels, and
Speaker 4: there's a lot of uncertainty. And what's happened through the
Speaker 4: year is people have figured out ways to deal with
Speaker 4: that uncertainty. So as for today, I think most businesses
Speaker 4: and most households are not thinking that the worst of
Speaker 4: the possible outcomes.
Speaker 1: Are going to happen. They're not sure they can get
Speaker 1: to the best ones.
Speaker 4: But everyone's trying to find a steady state where they
Speaker 4: can get through. So I think the sentiment is one
Speaker 4: of cautious optimism. But I put emphasis on the cautious
Speaker 4: as opposed to the optimism. I think people that are really
Speaker 4: trying to wait and see what happens.
Speaker 2: Well, what do you think that means for the economy.
Speaker 4: Well, I think it means that the things that we've
Speaker 4: seen for the second half of twenty twenty five we
Speaker 4: will continue to see through twenty twenty six. And I've
Speaker 4: talked to a lot of folks in the last six
Speaker 4: weeks or so, and they said, we think our experiences
Speaker 4: in October and November December are likely to move on.
Speaker 1: And then there are some reasons.
Speaker 4: Why they think it might actually get stronger.
Speaker 1: You know, the tariffs.
Speaker 4: People have gotten used to those, and so those effects
Speaker 4: will run through by the middle of the year. We've
Speaker 4: seen some of the stimulative aspects of the tax bill
Speaker 4: last summer.
Speaker 1: Those will be coming on board.
Speaker 4: And if consumers start to feel like there's more certainty
Speaker 4: then I think businesses, I think there's some upside potential
Speaker 4: in the economy.
Speaker 3: Well, this last week we've gotten a lot of bad
Speaker 3: news on the employment front with ADP and Challenger and
Speaker 3: the other numbers that have come out. Does any of
Speaker 3: that you don't have another meeting to vote at, But
Speaker 3: does any of that give you pause about the FED
Speaker 3: pausing at this point?
Speaker 4: For me, no, I think we've been in a situation
Speaker 4: where inflation has been too high for too long, and
Speaker 4: by many readings it's been kind of marking time has
Speaker 4: been at a plateau well above our target for the
Speaker 4: better part of two years. That's not acceptable, and for me,
Speaker 4: I think we can't lose sight of the inflationary concerns.
Speaker 4: The labor market is very turbulent right now, and some
Speaker 4: of it is because there are some big structural things
Speaker 4: are happening in the economy. You talk, when I talk
Speaker 4: to businesses, they're reluctant to hire entry level people at
Speaker 4: the same ways that they did before because they think
Speaker 4: things like AI can replace that and they can deploy
Speaker 4: resources for other things.
Speaker 1: And I'm hearing that kind of reticence.
Speaker 4: There's also the reality that during the pandemic, a lot
Speaker 4: of companies ramped up because the demand ramped up, and
Speaker 4: they've been slower to right size. We see a bunch
Speaker 4: of that right sizing happening as well. And then we
Speaker 4: have issues around the labor supply and whether the immigration
Speaker 4: shifts are going to be temporary or permanent, and if
Speaker 4: they're permanent, then we're going to have a lower steady
Speaker 4: state job creation. So for all those reasons, I think
Speaker 4: it's very hard to make a clear statement. And then,
Speaker 4: of course we don't have a jobs number today, so
Speaker 4: we're not getting the data in a timely, timely basis.
Speaker 4: My team tells me it will be April or May
Speaker 4: before we start to be able to draw clear signals
Speaker 4: from the data to really understand.
Speaker 1: What's going on.
Speaker 2: Yeah, we wanted to wish you a happy non jobs
Speaker 2: dated today.
Speaker 3: You started a long and varied career at the FED
Speaker 3: in nineteen ninety five. Since d what have you learned
Speaker 3: about the economy and about inflation?
Speaker 4: Well, I think for the economy, one thing that's true
Speaker 4: is that it is a very complex economy is very large,
Speaker 4: and to understand it you really have to get out
Speaker 4: and see all parts of it and One of the things
Speaker 4: that's been great in my role here is I've had
Speaker 4: a chance.
Speaker 1: To do that.
Speaker 4: I think it's given me a deeper understanding of just
Speaker 4: how people engage and experience the economy and how they
Speaker 4: make decisions to move it forward. In terms of inflation,
Speaker 4: you know, what I've learned is that we really don't
Speaker 4: want to have inflation. Once inflation gets entransient, people's mindset
Speaker 4: changes how the economy evolves. And it's one of the
Speaker 4: reasons why I think that we need to keep our
Speaker 4: policy in a restrictive posture so that we get inflation
Speaker 4: back to two percent. This paramount high prices and the
Speaker 4: prospect of rising prices really do have a lot of
Speaker 4: families on the edge. I mean, you all have reported
Speaker 4: a lot about the K shaped economy. There are lots
Speaker 4: of families that are feeling very precarious right now, and
Speaker 4: that's the source of concern.
Speaker 2: Do you think the economy is becoming more K shaped?
Speaker 1: You know, I don't know more. I mean it's been
Speaker 1: that way for a while.
Speaker 4: Just before the pandemic, I had been talking about this
Speaker 4: and we were trying to find some metrics to really
Speaker 4: detail how there's a split. I used to call it
Speaker 4: the Barbell economy, where either you were at the high
Speaker 4: end or at the low end.
Speaker 1: The K shape is the same thing.
Speaker 4: What I know is that there are a lot of
Speaker 4: families that are precarious and are feeling very uncertain about
Speaker 4: their prospects for the future and the prospects for their
Speaker 4: children for that matter. And that concern, I think does
Speaker 4: underlie a bit of the lower on the low consumer
Speaker 4: confidence that we continue to see being reported. And what
Speaker 4: we'll need to do is really give people reasons to
Speaker 4: be optimistic, to show them where the new jobs are
Speaker 4: coming from, and show them how they get the skills
Speaker 4: to compete.
Speaker 2: For it well.
Speaker 3: This week, Treasury Secretary Besson said the FED has lost
Speaker 3: the confidence of the American people.
Speaker 2: Do you think you.
Speaker 3: Have lost the confidence of the American people in your district?
Speaker 3: Do you hear people raising questions about that?
Speaker 4: That's not been my experience. As I go around the
Speaker 4: sixth district, people tell me we're grateful for what you're doing.
Speaker 4: You have a very hard job, and we want you
Speaker 4: to be as data dependent and as open to information
Speaker 4: so you can make the best judgment that you can.
Speaker 1: Look.
Speaker 4: The world is very complicated it's actually more complicated today
Speaker 4: than it has been my whole time here. So I
Speaker 4: think most people understand that, and they know that we're
Speaker 4: doing the best job that we can under very difficult circumstances.
Speaker 3: Well, you have a unique perspective because when you took
Speaker 3: office the Atlanta FED in twenty seventeen, you were the
Speaker 3: first black president of a regional FED bank. Looking back
Speaker 3: now and hearing the criticism that we get from Washington,
Speaker 3: do you think the Fed was too woke and perhaps
Speaker 3: the inclusive employment idea was a mistake.
Speaker 1: I don't think so.
Speaker 4: Look, what we have is an economy that needs to
Speaker 4: work for everyone, and if we're not mindful about the
Speaker 4: ways that the economy is not working for people, then
Speaker 4: our maximum employment outcome is going to be lower than
Speaker 4: it can be and it doesn't serve the American people
Speaker 4: as well as it could. So I think the focus
Speaker 4: on every American and every Americans experience is exactly the.
Speaker 1: Thing that the Federal Reserve needs to be doing.
Speaker 4: That's different than saying that that is unduly influencing our
Speaker 4: policy decisions.
Speaker 1: And I will say, through this whole.
Speaker 4: Episode, the whole time I've been here, you can look
Speaker 4: at at the market projectors. In the market projections, they
Speaker 4: in many instances we're more extreme than ours, right, And
Speaker 4: so I actually think we've been doing the best that
Speaker 4: we can and we've been data dependent and the way
Speaker 4: we've been for one hundred and some odd years. So
Speaker 4: I don't take on board those arguments.
Speaker 3: Well, the new chair designate, Kevin Warsh says that that
Speaker 3: needs regime change.
Speaker 2: What does that mean to you?
Speaker 1: I have no idea. You're going to have to ask
Speaker 1: him what that means.
Speaker 4: I think we definitely need to be data dependent. Our
Speaker 4: bank has really taken on board the notion that we
Speaker 4: need to go out and engage and talk to business leaders,
Speaker 4: find out how they're engaging with the business, how they're
Speaker 4: making decisions, and that combination we have found to give
Speaker 4: us the best perspective on how the economy is performing.
Speaker 4: I don't think that we should change from that. I
Speaker 4: think we might need to even lean in more to
Speaker 4: those non official data sources as the economy is changing
Speaker 4: so rapidly, because those are all looking backwards and we
Speaker 4: need to be looking forward.
Speaker 3: Well, he's been very critical of what he calls the
Speaker 3: fence mission creep.
Speaker 2: Does he have a point?
Speaker 4: I actually don't even see the mission creep argument. Like
Speaker 4: for me, on the banking side, for example, our job
Speaker 4: is to make sure that every bank that's alive today
Speaker 4: is alive tomorrow, and so we need to make sure
Speaker 4: that banks are thinking about the risks that could cause
Speaker 4: them to need to deploy capital in ways others then
Speaker 4: in loans, and so having conversations about those things I
Speaker 4: think is fully appropriate and we should be doing that.
Speaker 4: We don't tell banks where to land. I've never told
Speaker 4: the bank don't do a loan or don't do that
Speaker 4: sort of thing, and my examiners don't as well.
Speaker 1: I think we're.
Speaker 4: Asking prudent questions to make sure that financial sector business
Speaker 4: leaders are aware of trends that could be introducing risk.
Speaker 3: Warsh also says that he wants to shelve QY and
Speaker 3: significantly shrink the balance sheet and perhaps go back to
Speaker 3: a scarce reserves regime for managing the interest rates of
Speaker 3: the country. Could he do that? Would that be a
Speaker 3: good idea or how hard would that be?
Speaker 1: So I think it's doable to me.
Speaker 4: I was not at the FED when the decision was
Speaker 4: made to go from the scarce reserves to an abundant
Speaker 4: reserve regime. I do know there were tensions and a
Speaker 4: lot of volunteer that happened in the scarce reserve environment,
Speaker 4: and so if you're we're going to move back to that,
Speaker 4: I would hope that there'd be a discussion about how
Speaker 4: to mitigate that volatility, because so much of what we've
Speaker 4: done is just to make sure there's liquidity in the marketplace,
Speaker 4: and that liquidity is actually important to make sure that
Speaker 4: consumers and businesses are not worrying. I can just worry
Speaker 4: about is this a good decision, as opposed to whether
Speaker 4: I can execute on the good decision that leadst a
Speaker 4: different kind of allocation of capital is not helpful.
Speaker 2: Tell me about j Powell and what he means to
Speaker 2: the FED.
Speaker 1: Jay has been great.
Speaker 4: He's a colleague, I consider him a friend, very open
Speaker 4: and very transparent, and he's led the institution.
Speaker 1: He's been at the institution for a long.
Speaker 4: Time, through a lot of significant periods. I think his
Speaker 4: legacy will be quite positive and I'd be sad to
Speaker 4: see him and leave the board if that's what he
Speaker 4: chooses to do. But it's been a great relationship for
Speaker 4: me with him, and I've had been my pleasure to
Speaker 4: serve under him.
Speaker 3: Do you agree with the sentiments he showed when he
Speaker 3: made his video a couple of weeks ago.
Speaker 1: So I'm not going.
Speaker 4: To talk about the specifics of the legal action from
Speaker 4: the Justice Department. What I would say is this, it
Speaker 4: is essential that the FED performance duty mindful to its charge,
Speaker 4: which is stable price and maximum employment to really focus
Speaker 4: and create long term stability and predictability.
Speaker 1: In the US economy.
Speaker 4: And if you want to call it independence or whatever
Speaker 4: you want to call it, you can do that. But
Speaker 4: that's the charge and we need to stay true to that,
Speaker 4: even when people with different horizons and different objectives have
Speaker 4: their views about what.
Speaker 1: We want to do.
Speaker 3: There were questions about the FED and its ethics rules.
Speaker 3: You ranted some problems, as did others with those.
Speaker 2: Was that the rules or was that the individuals who
Speaker 2: created the problems?
Speaker 4: Well, you know, individuals make the rules. I will say
Speaker 4: for me, I thought I was doing the right thing,
Speaker 4: and I found out that I wasn't. So once I
Speaker 4: discovered that I didn't, I wasn't doing that in the
Speaker 4: reporting side, then I changed them and I changed our rules.
Speaker 4: I want to make sure that no one goes through
Speaker 4: that at all, and It's grateful that the IG report
Speaker 4: validated that I wasn't using entire information, and so to me,
Speaker 4: I think we need to make sure the rules are
Speaker 4: clear and they draw up right lines so that not
Speaker 4: that lay people can come in and use them in
Speaker 4: ways that allow them to avoid the challenges that I had.
Speaker 4: And then you know, there may be some people that
Speaker 4: have problems, but that's not what I've seen in terms
Speaker 4: of my experience.
Speaker 3: Well, last question, what would you tell Donald Trump if
Speaker 3: you had the opportunity about j Powell and about the FED?
Speaker 1: I'd say Jay's trying to do the best that he can.
Speaker 4: He's a smart man, he understands markets, uh, and if
Speaker 4: you want him to succeed, you should let him succeed.
Speaker 3: The FED itself, do you think it is under threat
Speaker 3: from this administration threat?
Speaker 1: I don't know.
Speaker 4: What I would say is my whole time here, and
Speaker 4: I think that most of the history of the FED,
Speaker 4: there have been people who thought the FED should do
Speaker 4: other things and talked about.
Speaker 1: That, and we called them out.
Speaker 4: This is another one of those times, and we need
Speaker 4: to be mindful and we need to be solid and
Speaker 4: resolute to understand that. That's part of that comes with
Speaker 4: the territory, and with that territory then requires our strength
Speaker 4: and our resoluteness to stay focused on what we've.
Speaker 1: Been asked to do.
Speaker 3: We fail, Bastic, thank you very much for joining us
Speaker 3: as president for another couple of weeks.
Speaker 2: I've got at landa fed