WEBVTT - Atlanta Fed President Raphael Bostic Talks Rate Cuts 0:00:00.080 --> 0:00:02.080 We are so glad to have shopping expert in the 0:00:02.080 --> 0:00:05.240 Atlanta Airport. Atlanta FED President Rafael Bostik, who is with 0:00:05.320 --> 0:00:07.680 us here on site, really appreciate you being with us. 0:00:08.080 --> 0:00:10.200 President bos Tak, I want to start with a change 0:00:10.200 --> 0:00:12.320 in tone that we have heard from you over the 0:00:12.360 --> 0:00:13.520 past couple of weeks. 0:00:13.760 --> 0:00:15.200 It seems like three. 0:00:14.960 --> 0:00:18.160 Months ago you were not that urgent, urgently feeling like 0:00:18.200 --> 0:00:21.440 we needed to see lower rates. You've kind of changed 0:00:21.520 --> 0:00:24.000 recently and really seen the need for it. 0:00:24.360 --> 0:00:25.160 What's caused that. 0:00:25.120 --> 0:00:28.360 Change, Well, I think two things have really happened to 0:00:28.440 --> 0:00:30.240 lead for that change. First of all, good morning, It's 0:00:30.240 --> 0:00:30.960 good to see y'alls. 0:00:31.040 --> 0:00:32.360 Good to see, really good to be here. 0:00:33.240 --> 0:00:35.760 The one change is that inflation has moved a lot 0:00:35.800 --> 0:00:39.319 faster than I had anticipated. We've for the last two 0:00:39.400 --> 0:00:43.720 years have really been in a mission of getting inflation 0:00:43.840 --> 0:00:46.199 back to our two percent goal. We had seen a 0:00:46.200 --> 0:00:48.680 lot of progress early this year, it seemed like it 0:00:48.720 --> 0:00:51.560 may have been soling out. I'm really gratified to see 0:00:51.560 --> 0:00:54.320 that it's continuing back on that pace and that's a 0:00:54.400 --> 0:00:56.640 very good thing. And then the second part is the 0:00:56.680 --> 0:00:59.920 employment side. So we know that unemployment rates have gone 0:01:00.120 --> 0:01:02.680 from about three point four percent to four point three percent. 0:01:03.040 --> 0:01:07.200 That's a big change. Now it's from super hot to 0:01:07.280 --> 0:01:08.920 solid right. So I don't want to make it seem 0:01:09.000 --> 0:01:11.960 like labor markets are a week, but it really starts 0:01:11.959 --> 0:01:14.039 to tell me that things are much more imbalanced than 0:01:14.080 --> 0:01:17.639 they have been for quite some time. And that's really 0:01:18.360 --> 0:01:21.280 a sign that our policy has done his job and 0:01:21.319 --> 0:01:24.560 now we need to start the path back to our 0:01:24.560 --> 0:01:26.319 more neutral stance. 0:01:26.480 --> 0:01:28.280 More than anyone at the FED, you've got a more 0:01:28.280 --> 0:01:30.959 holistic view with John Show and at Stanford, with all 0:01:30.959 --> 0:01:34.800 the academics you've done in southern California about racism, about 0:01:34.840 --> 0:01:38.160 society and all. We're in the maelstream of a political election. 0:01:38.280 --> 0:01:40.480 Greg Yepp, writing in the Wall Street Journal in the 0:01:40.560 --> 0:01:45.920 last twenty four hours, says, the politicians are not practicing economics. 0:01:46.160 --> 0:01:49.360 How does the FED get to the September meeting, get 0:01:49.400 --> 0:01:53.600 to the November meeting and avoid the first Tuesday of November? 0:01:53.640 --> 0:01:58.080 How do you maintain FED independence with this crazy economic 0:01:58.160 --> 0:01:58.960 dialogue here? 0:02:00.160 --> 0:02:03.040 You don't think it's that hard to remain independent. I 0:02:03.040 --> 0:02:05.800 think for us, the job is to keep our heads down, 0:02:06.400 --> 0:02:10.120 do our work, read the data, study it, get input 0:02:10.200 --> 0:02:13.639 from businesses and people all over this country to get 0:02:13.680 --> 0:02:16.480 a good handle about where the economy is, how it's moving, 0:02:16.840 --> 0:02:19.600 and how people feel is going to move forward, and 0:02:19.639 --> 0:02:22.359 then use that information to figure out what the most 0:02:22.400 --> 0:02:25.359 appropriate policy is. The worst thing that we can do 0:02:25.760 --> 0:02:29.959 is not do the right thing for reasons other than 0:02:30.680 --> 0:02:33.000 this not being the right thing right And to me, 0:02:33.160 --> 0:02:37.080 I think we must at all times be true to 0:02:37.919 --> 0:02:41.040 Our job is to set up a long run environment 0:02:41.040 --> 0:02:43.720 for this economy so that it's got a firm foundation, 0:02:44.240 --> 0:02:47.200 and that means we can't be focused and pulled into 0:02:47.240 --> 0:02:48.400 the shorter run issues. 0:02:48.560 --> 0:02:49.760 So I'm just gonna keep my head down. 0:02:49.800 --> 0:02:52.919 The FED has a long history of doing whatever it takes, 0:02:52.960 --> 0:02:56.079 whenever it takes, and that's what I expect we'll do too. 0:02:56.560 --> 0:02:59.040 You've been criticized. The Fed's been criticized by a lot 0:02:59.040 --> 0:03:01.440 of people on Wall Street who say you're too data dependent, 0:03:01.520 --> 0:03:04.880 you're looking backwards too much. I don't think they realize 0:03:04.919 --> 0:03:07.520 that you're constantly talking to people in your district to 0:03:07.520 --> 0:03:08.840 get the current lay of the land. 0:03:09.160 --> 0:03:10.440 So what is that lay of the land. 0:03:10.440 --> 0:03:13.400 What are CEOs telling you about their plans and their 0:03:13.520 --> 0:03:16.280 view of demand and business going forward? 0:03:16.480 --> 0:03:19.320 Well, you should tell people more often we spend a 0:03:19.400 --> 0:03:21.960 lot of time looking forward. That's actually a really important thing. 0:03:22.240 --> 0:03:25.720 We do surveys. Our bank has a lot of surveys 0:03:25.720 --> 0:03:27.880 that we do, asking what's your outlook for the next 0:03:27.880 --> 0:03:29.680 six months, for the next twelve months in the light 0:03:30.480 --> 0:03:31.600 we hear a couple things. 0:03:31.840 --> 0:03:32.520 So one we. 0:03:32.560 --> 0:03:36.280 Hear that the demand for product is weakening, but it's 0:03:36.280 --> 0:03:40.760 still quite solid. We hear that businesses are not expecting 0:03:40.840 --> 0:03:45.000 to expand their workforces in a very significant way, but 0:03:45.040 --> 0:03:47.280 they're also not expecting to light people off, that that 0:03:47.560 --> 0:03:50.120 is not the mode. That they're really in a steady 0:03:50.120 --> 0:03:52.680 state where they can handle where things are, and their 0:03:52.720 --> 0:03:55.320 outlook for the next six to twelve months is by 0:03:55.360 --> 0:03:58.240 and large positive. Maybe a little lower in terms of 0:03:58.320 --> 0:04:01.080 revenues and profits from where we've been last two or 0:04:01.080 --> 0:04:02.880 three years, but last two or three years have been 0:04:03.200 --> 0:04:07.120 record breaking pretty much in every sector, every industry. So 0:04:07.200 --> 0:04:10.200 it's a solid picture, and it's one of the reasons 0:04:10.240 --> 0:04:13.080 why I do think that we've had some space to 0:04:13.120 --> 0:04:16.719 be patient with our policy moves and we'll just have 0:04:16.839 --> 0:04:18.800 to see whether their outlook plays out. 0:04:18.960 --> 0:04:19.920 I'm hopeful that it does. 0:04:20.400 --> 0:04:22.560 Given the problems least we talked about earlier with the 0:04:22.640 --> 0:04:24.800 data and coming out of the pandemic and everything. How 0:04:24.839 --> 0:04:28.320 certain are you that your data is correct enough that 0:04:28.360 --> 0:04:29.480 you're not behind the curve. 0:04:30.200 --> 0:04:34.520 Well, I mean, we try really hard to get our 0:04:34.600 --> 0:04:38.520 view based on the pulse that business leaders are showing 0:04:38.560 --> 0:04:41.760 at every moment. We talked to folks day to day, 0:04:41.920 --> 0:04:45.080 week to week, and we ask two questions all the time. One, 0:04:45.320 --> 0:04:47.599 what's your outlook for the next six months, and how 0:04:47.640 --> 0:04:50.279 has that changed relative to where you were two weeks 0:04:50.279 --> 0:04:52.880 ago or three weeks ago. We are trying really hard 0:04:53.160 --> 0:04:56.239 to notice those inflection points so that we can speak 0:04:56.240 --> 0:04:59.200 to that, we can bring that to our policy table 0:04:59.240 --> 0:05:02.719 and make sure that we're behind the curve. But this 0:05:02.839 --> 0:05:04.880 these are turbulent times, as you know. I mean, you'll 0:05:05.040 --> 0:05:09.880 recover the economy. Things are happening in unexpected ways in 0:05:10.040 --> 0:05:13.480 many different venues and many different parts of the economy, 0:05:13.760 --> 0:05:16.800 and so there is a natural trend. There's always some uncertainty, 0:05:17.000 --> 0:05:19.120 and we've just got to sort of navigate our way 0:05:19.120 --> 0:05:21.200 through and do the best that we can to get 0:05:21.200 --> 0:05:22.520 as much information so we can. 0:05:22.440 --> 0:05:23.279 Make good policy. 0:05:23.360 --> 0:05:24.280 What does gradual mean? 0:05:25.720 --> 0:05:27.960 Oh, well, that's a very good question. 0:05:28.040 --> 0:05:33.159 So to me, I think it is taking one step 0:05:33.160 --> 0:05:36.680 at a time and after each step, looking around to 0:05:36.720 --> 0:05:38.320 see how the economy is evolved. 0:05:38.320 --> 0:05:40.960 Okay, what everyone's asking is really is that step twenty 0:05:41.000 --> 0:05:43.479 five basis points? Is it defty basis points? Does one 0:05:43.560 --> 0:05:44.760 mean gradual? And whatnot? 0:05:45.279 --> 0:05:49.520 So I would say this the first step. It will 0:05:49.520 --> 0:05:51.680 depend on what the next couple data points come in. 0:05:52.480 --> 0:05:55.560 A couple of data points come in, and inflation is 0:05:55.600 --> 0:05:59.360 moving and unemployment is staying pretty stable. I think a 0:05:59.400 --> 0:06:03.680 move would be on the lower side. But there's a 0:06:03.760 --> 0:06:06.799 narrative that says inflation comes in super hot and maybe 0:06:06.839 --> 0:06:10.400 we don't move at all, or that unemployment spikes in 0:06:10.400 --> 0:06:13.240 an unexpected way and we have to move bigger. I 0:06:13.240 --> 0:06:17.440 don't want to really be sitting on any one action 0:06:17.760 --> 0:06:21.640 as my modal expectation today. I'm really gonna let things 0:06:21.680 --> 0:06:23.720 play out. And you know, one of the things I've 0:06:23.800 --> 0:06:27.640 learned very much in the last four years is that 0:06:27.920 --> 0:06:31.480 getting too far out ahead of what actually happens just 0:06:31.600 --> 0:06:33.680 causes me. There's been a lot of extra energy that 0:06:33.760 --> 0:06:36.600 I wind up having to sort of undo and then 0:06:36.680 --> 0:06:38.640 get to where the reality is. So I really am 0:06:38.680 --> 0:06:41.200 trying as much as possible to be in the moment 0:06:41.600 --> 0:06:42.320 and of the moment. 0:06:42.839 --> 0:06:45.120 Well, markets are forward looking, they're not in the moment. 0:06:45.200 --> 0:06:47.599 So everybody wants to know where do you end up? 0:06:47.600 --> 0:06:50.320 Where do you think neutral is going to end up 0:06:50.400 --> 0:06:52.200 when you finish your cutting cycle. 0:06:52.320 --> 0:06:55.320 So I'll say two things on this one in the 0:06:55.440 --> 0:06:57.560 SEPs and the dot plus, we have to put a 0:06:57.560 --> 0:06:59.680 long run number for me. Right now, that long run 0:06:59.760 --> 0:07:02.520 number is three percent. I think it's a little higher 0:07:02.520 --> 0:07:06.400 than where it was the depths of the pandemic, but 0:07:07.279 --> 0:07:09.960 where that is precisely is unclear. The second thing I 0:07:09.960 --> 0:07:13.000 would say, though, is I've really been focused much more 0:07:13.080 --> 0:07:15.360 on making sure that inflation gets to two percent than 0:07:15.400 --> 0:07:18.560 what a long run number is, and now that we're 0:07:18.920 --> 0:07:22.960 close to moving on that way, that's a question that 0:07:23.000 --> 0:07:25.280 I will spend a lot more time with my team 0:07:25.320 --> 0:07:29.120 trying to figure out. In my building, we started to 0:07:29.120 --> 0:07:33.080 have discussion slash arguments about this, and in my blood, 0:07:33.120 --> 0:07:35.800 I get views ranging from two and a half to 0:07:35.880 --> 0:07:36.640 four and a quarter. 0:07:37.040 --> 0:07:39.040 Right, that's a large range, and. 0:07:39.000 --> 0:07:41.720 We're going to have to narrow that down, and so 0:07:41.760 --> 0:07:44.480 I'm really looking forward to a robust discussion that will 0:07:44.520 --> 0:07:47.240 help me get a sense of where I think it. 0:07:47.160 --> 0:07:50.200 Is two years ago, J. Powell's speech was eight minutes long. 0:07:50.280 --> 0:07:51.640 How long do you think this speech is going to be? 0:07:52.160 --> 0:07:54.400 So you know, I don't get any insights on that. 0:07:55.000 --> 0:07:59.840 Eight is historically the record breaking short. I'm not expecting 0:07:59.880 --> 0:08:02.600 a break records today, but we'll have to see what happens. 0:08:02.760 --> 0:08:05.560 Raphael Vostik, President of the Atlanta Fed, Thank you so 0:08:05.640 --> 0:08:06.520 much for being with us.