WEBVTT - Atlanta Fed Pres Raphael Bostic Talks Inflation

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. Good morning, and good

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<v Speaker 1>morning to all of our listeners and viewers on Bloomberg

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<v Speaker 1>Radio and television worldwide. We are at Amelia Island in

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<v Speaker 1>Florida for the Financial Markets Conference of the Atlanta FED,

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<v Speaker 1>and the host has graciously agreed to join us this

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<v Speaker 1>early morning.

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<v Speaker 2>Thank you for being with us.

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<v Speaker 1>I'm not going to ask you when you're going to

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<v Speaker 1>cut rates, because nothing's probably changed in your view that

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

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<v Speaker 1>been the one saying maybe one later this year.

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<v Speaker 2>That's the same, right, nothing.

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<v Speaker 3>Has changed with first of all, good morning, it's good

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<v Speaker 3>to see you, and welcome to the conference. It's good

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<v Speaker 3>to have you here.

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<v Speaker 2>What you said is exactly right.

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<v Speaker 3>The numbers have come in for the first part of

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<v Speaker 3>this year very bumpy, and it really suggests that inflation

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<v Speaker 3>is going to come down far slower than I think

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<v Speaker 3>many had expected. And so rather than focus on numbers

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<v Speaker 3>of cuts and all that kind of stuff, really the

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<v Speaker 3>issue right now is when are we going to be

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<v Speaker 3>certain that inflation is clearly on.

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<v Speaker 2>Its path of two percent.

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<v Speaker 3>I think it's going to take a while before we'll

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<v Speaker 3>know that.

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<v Speaker 1>For sure, Well, what is it that tells you that

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<v Speaker 1>maybe you'll only get one or you might get no

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<v Speaker 1>cuts this year?

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<v Speaker 2>What do you see in the economy?

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<v Speaker 3>Well, you know, we do a lot of talking to

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<v Speaker 3>business leaders, and what they're all telling us is things

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<v Speaker 3>are slowing down, but they're slowing down very slowly on

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<v Speaker 3>coming off of pretty high record levels of profits and revenue.

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<v Speaker 3>So in that instance, there's going to be continued momentum

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<v Speaker 3>in the economy, and that momentum is just going.

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<v Speaker 2>To take a while to play through.

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<v Speaker 3>The other thing everyone tells us, though, is that pricing

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<v Speaker 3>power is weakening. They do know that the expansion in

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<v Speaker 3>large growth is not in their outlooks and on the table,

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<v Speaker 3>And so for me, that says, yeah, it's going to

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

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<v Speaker 3>going to be eventual.

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<v Speaker 1>Is it likely that inflation does go down or that

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<v Speaker 1>it could go up.

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<v Speaker 3>Again, Well, as you know, anything can happen. My outlook

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<v Speaker 3>is really that inflation we'll continue to fall through this

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<v Speaker 3>year and into twenty twenty five. I think that it

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<v Speaker 3>will take quite a while for us to get all

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<v Speaker 3>the way to two percent, but I do think we'll

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<v Speaker 3>get there. But of course, the unexpected can always happen,

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

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<v Speaker 3>where the pandemic was not expected. A war in Europe

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

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<v Speaker 3>If that happens, we'll just have to be ready and

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<v Speaker 3>then respond as appropriate.

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<v Speaker 1>One of the themes of this conference is sort of

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<v Speaker 1>what happens next?

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<v Speaker 2>So what happens next?

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<v Speaker 1>You're higher for longer now, and some think you're going

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<v Speaker 1>to be higher forever, that we're not going back to

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<v Speaker 1>low interest rates.

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<v Speaker 3>Well, I don't think we're going to go Well, let

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<v Speaker 3>me say this, I hope we don't go back to

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<v Speaker 3>zero interest rates, because that means something will have happened

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<v Speaker 3>that requires us to go to maximum support for the economy,

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<v Speaker 3>and that would not be ideal for anybody.

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<v Speaker 2>I do think.

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<v Speaker 3>That our new steady state is likely to be higher

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<v Speaker 3>than what people have known over the last decade, maybe

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<v Speaker 3>back to where we were in the nineteen nineties and

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<v Speaker 3>two thousands.

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<v Speaker 2>But we'll just have to see.

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<v Speaker 3>But I do think a strong important message people should

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<v Speaker 3>have is going back to zero means that something bad

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<v Speaker 3>happened in the economy and we want to avoid that

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<v Speaker 3>as much as possible.

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<v Speaker 1>Well, what do you say to people who want to

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<v Speaker 1>move or people who want to buy a new car?

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<v Speaker 1>Hold on, wait or how long do these industries have

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<v Speaker 1>that they can hold out until you decide what you're

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<v Speaker 1>going to do next.

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

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<v Speaker 3>On the business side, you see in the auto space

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<v Speaker 3>that producers and auto dealers they're adding incentives for people

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<v Speaker 3>to buy their cars. We talked to lots of major

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

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<v Speaker 3>trying to do those things. And I think for consumers

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<v Speaker 3>it's really shop around, back to where we used to

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<v Speaker 3>be and how the economy used to work. You got

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<v Speaker 3>to go find where there are opportunities. They're out there,

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<v Speaker 3>but people just need to live their lives. And what

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

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<v Speaker 3>The housing and home ownership, that's a special case and

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<v Speaker 3>people are locked into those. But even there, because we

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<v Speaker 3>have remote work and we have people work in these

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<v Speaker 3>hybrid situations, there are opportunities for people to continue to

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<v Speaker 3>stay engaged in the economy.

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<v Speaker 1>Well, a lot of people look at the housing industry,

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<v Speaker 1>for example, and other areas that have started to slow down.

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<v Speaker 1>And there's an argument that maybe you're going to be

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<v Speaker 1>behind the curve in cutting rates.

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<v Speaker 3>I don't think that that's really the right way to

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<v Speaker 3>think about it. For me, our mandate is stable prices

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<v Speaker 3>and maximum employment. On the employment side, we're still seeing

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<v Speaker 3>many many jobs being created. On the inflation side, and

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

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<v Speaker 3>And so for us and I think our given our mandates,

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<v Speaker 3>we need to get that stable price pricing aside to

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<v Speaker 3>where we need it to be, because at that point

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<v Speaker 3>then the economy will be positioned to stand on its own,

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<v Speaker 3>to move forward and to create a growth and prosperity.

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<v Speaker 1>When you get asked when you're going to cut rates

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<v Speaker 1>and you give the answer that you give, and your

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<v Speaker 1>colleagues get asked and give the answer that they give,

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<v Speaker 1>you've said as a group that we're not doing forward

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<v Speaker 1>guidance anymore. But is this a forward guidance that you're

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<v Speaker 1>doing any way, because it does seem like you're guiding

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<v Speaker 1>the markets, or at least the markets are reacting to

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<v Speaker 1>everything you say.

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<v Speaker 3>Well, I think the markets have always reacted to everything

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

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<v Speaker 3>I would say, though, is we are open to all

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<v Speaker 3>possibilities and from here moving forward, there are scenarios where

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<v Speaker 3>the economy is going to expand and accelerate, their scenarios

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<v Speaker 3>where the economy might slow down faster than expected. And

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<v Speaker 3>then there is my outlook scenario is slow in city

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<v Speaker 3>wins the race.

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<v Speaker 2>In all of those.

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<v Speaker 3>Cases, there are policy prescriptions and we have to be

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<v Speaker 3>ready for all of them. So in this sense, unlike

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<v Speaker 3>in the pandemic or even the Great Financial Crisis, when

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<v Speaker 3>we knew that most of the risk was on one side,

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<v Speaker 3>now the risks are really balance, and so there isn't

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<v Speaker 3>sort of a bias in one direction or another. I

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<v Speaker 3>think that's the message to be taken. If you want

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<v Speaker 3>to call that for a guidance, that's fine. I mean

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

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<v Speaker 3>life is you don't know something good that could happen,

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<v Speaker 3>something bad could happen, and you just have to be

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<v Speaker 3>ready for it.

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<v Speaker 1>Well, you've got another month essentially before you have your

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<v Speaker 1>next meeting, and you have to put.

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<v Speaker 2>Out your forecasts.

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<v Speaker 1>But it was a sneak preview of what you think

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<v Speaker 1>growth and inflation are going to be like for the

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<v Speaker 1>rest of the year.

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

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<v Speaker 3>I don't know. The way our process works is as

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<v Speaker 3>we get closer to the meeting, I meet with my team,

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<v Speaker 3>we really try to get a sense of where everybody

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<v Speaker 3>is on this. You know, I have a bunch of

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<v Speaker 3>great accounts in our building who have their own views

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<v Speaker 3>and opinions about how the economy is going to move forward.

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<v Speaker 3>I take that on board and we'll get to a

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

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<v Speaker 3>about this conference, making sure it goes off as well

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<v Speaker 3>as it can, and I'm really looking forward to.

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<v Speaker 1>You're going to be one just one dot by yourself

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<v Speaker 1>on the dot pot when it comes out.

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<v Speaker 3>Well, we'll see about that.

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<v Speaker 1>When you look at the economy overall, does it surprise

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<v Speaker 1>you still that we're seeing the strength and the labor

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<v Speaker 1>markets that we are seeing. Are you hearing anything from

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<v Speaker 1>CEOs about that turning?

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<v Speaker 3>So what I've heard from from business leaders really is

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<v Speaker 3>that today labor markets are weaker than they were, softer

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<v Speaker 3>than they were twelve months ago, but they're not soft.

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<v Speaker 3>You know, this is the question that we ask all

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<v Speaker 3>the time because we need to know how the labor

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<v Speaker 3>side of input to production is doing. But I think

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<v Speaker 3>it's really important when we think about workers and the

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<v Speaker 3>labor labor market is that before the pandemic, labor markets

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

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<v Speaker 3>to a place where you know, labor is going to

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<v Speaker 3>be there's be many many people out there available for work.

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<v Speaker 3>We're going to go back to where we were. I

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<v Speaker 3>will say, you know, there's been lots of reporters showed

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<v Speaker 3>immigration has been important and important contributor, and you know,

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<v Speaker 3>we'll see how it evolves moving forward.

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<v Speaker 1>Well, the big question that a lot of people Wall

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<v Speaker 1>Street and I guess in a way Main Street are asking,

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<v Speaker 1>is is monetary policy restrictive now? And is what you're

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<v Speaker 1>restricting the problems in the for inflation or is it

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<v Speaker 1>maybe stuff you can't do anything about.

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<v Speaker 3>Well, I think that our stance is restrictive.

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<v Speaker 2>Another thing we do.

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<v Speaker 3>We have surveys and I ask people all the time,

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<v Speaker 3>do you think that our policy stances preventing some things

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<v Speaker 3>from happening that you would do otherwise?

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<v Speaker 2>Every business leader says yes.

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<v Speaker 3>Now, some of them say, it's changed my forecast over

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<v Speaker 3>the next twelve months. There I have some cash so

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<v Speaker 3>I can actually buy some things and don't need to

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<v Speaker 3>use debt instruments for that. But everyone acknowledges to me

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<v Speaker 3>that our policy rate is slowing things down, it is tightening,

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<v Speaker 3>and that's what really gives me the confidence that we

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<v Speaker 3>can get inflation back to our two percent target.

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

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<v Speaker 1>getting asked their feelings about the economy. Do you think

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<v Speaker 1>we see any significant changes in the economy over the

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<v Speaker 1>next six months?

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<v Speaker 2>Say it's hard to say.

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<v Speaker 3>You know, my outlook is the economy is going to

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<v Speaker 3>continue to be growing, Inflation is going to continue to

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<v Speaker 3>come down slowly, the economy will continue to create jobs,

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<v Speaker 3>and the United States economy will continue to be the

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<v Speaker 3>leading economy in the world.

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<v Speaker 2>Will people feel that, Uh, You'll have.

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<v Speaker 3>To ask them. So. I think one of the things

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

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<v Speaker 3>We have people that are on the lower end of

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<v Speaker 3>the income and wealth distribution. They have spent gone through

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<v Speaker 3>their excess savings. They are feeling somewhat where they were

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<v Speaker 3>the same way as they were before the pandemic. Then

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<v Speaker 3>you have a lot of other folks who accrued a

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<v Speaker 3>lot of savings through the pandemic because they couldn't go

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

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<v Speaker 3>a spend mode, and so a lot of what I'm

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<v Speaker 3>trying to do today is figure out how that all

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<v Speaker 3>fits together to give a picture of how the aggregate

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<v Speaker 3>economy is going to move forward today. What I'm hearing

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<v Speaker 3>is that there's still enough spend on that upper end

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<v Speaker 3>that the economy can continue to grow, but it is

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<v Speaker 3>slowing down.

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<v Speaker 1>Well, we will check in with you in a couple

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<v Speaker 1>of months and see if anything's changed.

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<v Speaker 2>Rafael Bostic, thank you very much for joining us. Probably

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<v Speaker 2>the Atlanta Fed