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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Good morning, and good

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Speaker 1: morning to all of our listeners and viewers on Bloomberg

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Speaker 1: Radio and television worldwide. We are at Amelia Island in

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Speaker 1: Florida for the Financial Markets Conference of the Atlanta FED,

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Speaker 1: and the host has graciously agreed to join us this

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Speaker 1: early morning.

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Speaker 2: Thank you for being with us.

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Speaker 1: I'm not going to ask you when you're going to

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Speaker 1: cut rates, because nothing's probably changed in your view that

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Speaker 1: it's not time yet. You need more confidence, and you've

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Speaker 1: been the one saying maybe one later this year.

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Speaker 2: That's the same, right, nothing.

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Speaker 3: Has changed with first of all, good morning, it's good

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Speaker 3: to see you, and welcome to the conference. It's good

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Speaker 3: to have you here.

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Speaker 2: What you said is exactly right.

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Speaker 3: The numbers have come in for the first part of

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Speaker 3: this year very bumpy, and it really suggests that inflation

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Speaker 3: is going to come down far slower than I think

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Speaker 3: many had expected. And so rather than focus on numbers

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Speaker 3: of cuts and all that kind of stuff, really the

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Speaker 3: issue right now is when are we going to be

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Speaker 3: certain that inflation is clearly on.

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Speaker 2: Its path of two percent.

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Speaker 3: I think it's going to take a while before we'll

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Speaker 3: know that.

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Speaker 1: For sure, Well, what is it that tells you that

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Speaker 1: maybe you'll only get one or you might get no

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Speaker 1: cuts this year?

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Speaker 2: What do you see in the economy?

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Speaker 3: Well, you know, we do a lot of talking to

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Speaker 3: business leaders, and what they're all telling us is things

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Speaker 3: are slowing down, but they're slowing down very slowly on

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Speaker 3: coming off of pretty high record levels of profits and revenue.

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Speaker 3: So in that instance, there's going to be continued momentum

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Speaker 3: in the economy, and that momentum is just going.

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Speaker 2: To take a while to play through.

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Speaker 3: The other thing everyone tells us, though, is that pricing

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Speaker 3: power is weakening. They do know that the expansion in

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Speaker 3: large growth is not in their outlooks and on the table,

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Speaker 3: And so for me, that says, yeah, it's going to

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Speaker 3: slow down. It's going to get there, but it's only

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Speaker 3: going to be eventual.

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Speaker 1: Is it likely that inflation does go down or that

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Speaker 1: it could go up.

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Speaker 3: Again, Well, as you know, anything can happen. My outlook

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Speaker 3: is really that inflation we'll continue to fall through this

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Speaker 3: year and into twenty twenty five. I think that it

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Speaker 3: will take quite a while for us to get all

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Speaker 3: the way to two percent, but I do think we'll

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Speaker 3: get there. But of course, the unexpected can always happen,

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Speaker 3: and we've seen that through the last three or four years,

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Speaker 3: where the pandemic was not expected. A war in Europe

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Speaker 3: wasn't expected, and they do send ripples for the entire economy.

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Speaker 3: If that happens, we'll just have to be ready and

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Speaker 3: then respond as appropriate.

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Speaker 1: One of the themes of this conference is sort of

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Speaker 1: what happens next?

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Speaker 2: So what happens next?

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Speaker 1: You're higher for longer now, and some think you're going

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Speaker 1: to be higher forever, that we're not going back to

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Speaker 1: low interest rates.

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Speaker 3: Well, I don't think we're going to go Well, let

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Speaker 3: me say this, I hope we don't go back to

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Speaker 3: zero interest rates, because that means something will have happened

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Speaker 3: that requires us to go to maximum support for the economy,

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Speaker 3: and that would not be ideal for anybody.

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Speaker 2: I do think.

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Speaker 3: That our new steady state is likely to be higher

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Speaker 3: than what people have known over the last decade, maybe

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Speaker 3: back to where we were in the nineteen nineties and

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Speaker 3: two thousands.

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Speaker 2: But we'll just have to see.

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Speaker 3: But I do think a strong important message people should

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Speaker 3: have is going back to zero means that something bad

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Speaker 3: happened in the economy and we want to avoid that

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Speaker 3: as much as possible.

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Speaker 1: Well, what do you say to people who want to

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Speaker 1: move or people who want to buy a new car?

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Speaker 1: Hold on, wait or how long do these industries have

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Speaker 1: that they can hold out until you decide what you're

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Speaker 1: going to do next.

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Speaker 3: Well, I don't think anyone's waiting for us at disappointment.

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Speaker 3: On the business side, you see in the auto space

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Speaker 3: that producers and auto dealers they're adding incentives for people

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Speaker 3: to buy their cars. We talked to lots of major

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Speaker 3: sellers of cars. They're trying to move volume, they are

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Speaker 3: trying to do those things. And I think for consumers

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Speaker 3: it's really shop around, back to where we used to

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Speaker 3: be and how the economy used to work. You got

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Speaker 3: to go find where there are opportunities. They're out there,

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Speaker 3: but people just need to live their lives. And what

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Speaker 3: I'm finding and seeing is most of them are doing that.

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Speaker 3: The housing and home ownership, that's a special case and

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Speaker 3: people are locked into those. But even there, because we

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Speaker 3: have remote work and we have people work in these

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Speaker 3: hybrid situations, there are opportunities for people to continue to

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Speaker 3: stay engaged in the economy.

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Speaker 1: Well, a lot of people look at the housing industry,

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Speaker 1: for example, and other areas that have started to slow down.

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Speaker 1: And there's an argument that maybe you're going to be

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Speaker 1: behind the curve in cutting rates.

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Speaker 3: I don't think that that's really the right way to

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Speaker 3: think about it. For me, our mandate is stable prices

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Speaker 3: and maximum employment. On the employment side, we're still seeing

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Speaker 3: many many jobs being created. On the inflation side, and

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Speaker 3: the stable prices, we've still got a ways to go.

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Speaker 3: And so for us and I think our given our mandates,

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Speaker 3: we need to get that stable price pricing aside to

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Speaker 3: where we need it to be, because at that point

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Speaker 3: then the economy will be positioned to stand on its own,

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Speaker 3: to move forward and to create a growth and prosperity.

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Speaker 1: When you get asked when you're going to cut rates

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Speaker 1: and you give the answer that you give, and your

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Speaker 1: colleagues get asked and give the answer that they give,

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Speaker 1: you've said as a group that we're not doing forward

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Speaker 1: guidance anymore. But is this a forward guidance that you're

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Speaker 1: doing any way, because it does seem like you're guiding

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Speaker 1: the markets, or at least the markets are reacting to

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Speaker 1: everything you say.

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Speaker 3: Well, I think the markets have always reacted to everything

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Speaker 3: we say, so, I don't think this is new. What

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Speaker 3: I would say, though, is we are open to all

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Speaker 3: possibilities and from here moving forward, there are scenarios where

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Speaker 3: the economy is going to expand and accelerate, their scenarios

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Speaker 3: where the economy might slow down faster than expected. And

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Speaker 3: then there is my outlook scenario is slow in city

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Speaker 3: wins the race.

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Speaker 2: In all of those.

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Speaker 3: Cases, there are policy prescriptions and we have to be

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Speaker 3: ready for all of them. So in this sense, unlike

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Speaker 3: in the pandemic or even the Great Financial Crisis, when

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Speaker 3: we knew that most of the risk was on one side,

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Speaker 3: now the risks are really balance, and so there isn't

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Speaker 3: sort of a bias in one direction or another. I

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Speaker 3: think that's the message to be taken. If you want

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Speaker 3: to call that for a guidance, that's fine. I mean

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Speaker 3: to me, I think in many regards that's life. Like

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Speaker 3: life is you don't know something good that could happen,

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Speaker 3: something bad could happen, and you just have to be

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Speaker 3: ready for it.

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Speaker 1: Well, you've got another month essentially before you have your

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Speaker 1: next meeting, and you have to put.

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Speaker 2: Out your forecasts.

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Speaker 1: But it was a sneak preview of what you think

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Speaker 1: growth and inflation are going to be like for the

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Speaker 1: rest of the year.

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Speaker 3: Well, I've been told many times don't scoop yourself, so

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Speaker 3: I don't know. The way our process works is as

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Speaker 3: we get closer to the meeting, I meet with my team,

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Speaker 3: we really try to get a sense of where everybody

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Speaker 3: is on this. You know, I have a bunch of

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Speaker 3: great accounts in our building who have their own views

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Speaker 3: and opinions about how the economy is going to move forward.

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Speaker 3: I take that on board and we'll get to a

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Speaker 3: narrative at that point. But right now, I'm just worried

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Speaker 3: about this conference, making sure it goes off as well

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Speaker 3: as it can, and I'm really looking forward to.

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Speaker 1: You're going to be one just one dot by yourself

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Speaker 1: on the dot pot when it comes out.

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Speaker 3: Well, we'll see about that.

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Speaker 1: When you look at the economy overall, does it surprise

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Speaker 1: you still that we're seeing the strength and the labor

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Speaker 1: markets that we are seeing. Are you hearing anything from

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Speaker 1: CEOs about that turning?

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Speaker 3: So what I've heard from from business leaders really is

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Speaker 3: that today labor markets are weaker than they were, softer

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Speaker 3: than they were twelve months ago, but they're not soft.

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Speaker 3: You know, this is the question that we ask all

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Speaker 3: the time because we need to know how the labor

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Speaker 3: side of input to production is doing. But I think

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Speaker 3: it's really important when we think about workers and the

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Speaker 3: labor labor market is that before the pandemic, labor markets

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Speaker 3: were tight. So I don't think we're likely to evolve

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Speaker 3: to a place where you know, labor is going to

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Speaker 3: be there's be many many people out there available for work.

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Speaker 3: We're going to go back to where we were. I

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Speaker 3: will say, you know, there's been lots of reporters showed

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Speaker 3: immigration has been important and important contributor, and you know,

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Speaker 3: we'll see how it evolves moving forward.

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Speaker 1: Well, the big question that a lot of people Wall

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Speaker 1: Street and I guess in a way Main Street are asking,

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Speaker 1: is is monetary policy restrictive now? And is what you're

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Speaker 1: restricting the problems in the for inflation or is it

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Speaker 1: maybe stuff you can't do anything about.

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Speaker 3: Well, I think that our stance is restrictive.

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Speaker 2: Another thing we do.

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Speaker 3: We have surveys and I ask people all the time,

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Speaker 3: do you think that our policy stances preventing some things

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Speaker 3: from happening that you would do otherwise?

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Speaker 2: Every business leader says yes.

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Speaker 3: Now, some of them say, it's changed my forecast over

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Speaker 3: the next twelve months. There I have some cash so

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Speaker 3: I can actually buy some things and don't need to

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Speaker 3: use debt instruments for that. But everyone acknowledges to me

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Speaker 3: that our policy rate is slowing things down, it is tightening,

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Speaker 3: and that's what really gives me the confidence that we

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Speaker 3: can get inflation back to our two percent target.

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Speaker 1: Well, last question, we're obviously in a season where everybody's

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Speaker 1: getting asked their feelings about the economy. Do you think

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Speaker 1: we see any significant changes in the economy over the

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Speaker 1: next six months?

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Speaker 2: Say it's hard to say.

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Speaker 3: You know, my outlook is the economy is going to

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Speaker 3: continue to be growing, Inflation is going to continue to

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Speaker 3: come down slowly, the economy will continue to create jobs,

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Speaker 3: and the United States economy will continue to be the

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Speaker 3: leading economy in the world.

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Speaker 2: Will people feel that, Uh, You'll have.

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Speaker 3: To ask them. So. I think one of the things

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Speaker 3: I've heard is we don't have just one economy today.

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Speaker 3: We have people that are on the lower end of

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Speaker 3: the income and wealth distribution. They have spent gone through

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Speaker 3: their excess savings. They are feeling somewhat where they were

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Speaker 3: the same way as they were before the pandemic. Then

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Speaker 3: you have a lot of other folks who accrued a

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Speaker 3: lot of savings through the pandemic because they couldn't go

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Speaker 3: on vacations, they couldn't go to restaurants. They're still in

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Speaker 3: a spend mode, and so a lot of what I'm

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Speaker 3: trying to do today is figure out how that all

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Speaker 3: fits together to give a picture of how the aggregate

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Speaker 3: economy is going to move forward today. What I'm hearing

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Speaker 3: is that there's still enough spend on that upper end

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Speaker 3: that the economy can continue to grow, but it is

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Speaker 3: slowing down.

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Speaker 1: Well, we will check in with you in a couple

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Speaker 1: of months and see if anything's changed.

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Speaker 2: Rafael Bostic, thank you very much for joining us. Probably

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Speaker 2: the Atlanta Fed