Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Good morning, and good
Speaker 1: morning to all of our listeners and viewers on Bloomberg
Speaker 1: Radio and television worldwide. We are at Amelia Island in
Speaker 1: Florida for the Financial Markets Conference of the Atlanta FED,
Speaker 1: and the host has graciously agreed to join us this
Speaker 1: early morning.
Speaker 2: Thank you for being with us.
Speaker 1: I'm not going to ask you when you're going to
Speaker 1: cut rates, because nothing's probably changed in your view that
Speaker 1: it's not time yet. You need more confidence, and you've
Speaker 1: been the one saying maybe one later this year.
Speaker 2: That's the same, right, nothing.
Speaker 3: Has changed with first of all, good morning, it's good
Speaker 3: to see you, and welcome to the conference. It's good
Speaker 3: to have you here.
Speaker 2: What you said is exactly right.
Speaker 3: The numbers have come in for the first part of
Speaker 3: this year very bumpy, and it really suggests that inflation
Speaker 3: is going to come down far slower than I think
Speaker 3: many had expected. And so rather than focus on numbers
Speaker 3: of cuts and all that kind of stuff, really the
Speaker 3: issue right now is when are we going to be
Speaker 3: certain that inflation is clearly on.
Speaker 2: Its path of two percent.
Speaker 3: I think it's going to take a while before we'll
Speaker 3: know that.
Speaker 1: For sure, Well, what is it that tells you that
Speaker 1: maybe you'll only get one or you might get no
Speaker 1: cuts this year?
Speaker 2: What do you see in the economy?
Speaker 3: Well, you know, we do a lot of talking to
Speaker 3: business leaders, and what they're all telling us is things
Speaker 3: are slowing down, but they're slowing down very slowly on
Speaker 3: coming off of pretty high record levels of profits and revenue.
Speaker 3: So in that instance, there's going to be continued momentum
Speaker 3: in the economy, and that momentum is just going.
Speaker 2: To take a while to play through.
Speaker 3: The other thing everyone tells us, though, is that pricing
Speaker 3: power is weakening. They do know that the expansion in
Speaker 3: large growth is not in their outlooks and on the table,
Speaker 3: And so for me, that says, yeah, it's going to
Speaker 3: slow down. It's going to get there, but it's only
Speaker 3: going to be eventual.
Speaker 1: Is it likely that inflation does go down or that
Speaker 1: it could go up.
Speaker 3: Again, Well, as you know, anything can happen. My outlook
Speaker 3: is really that inflation we'll continue to fall through this
Speaker 3: year and into twenty twenty five. I think that it
Speaker 3: will take quite a while for us to get all
Speaker 3: the way to two percent, but I do think we'll
Speaker 3: get there. But of course, the unexpected can always happen,
Speaker 3: and we've seen that through the last three or four years,
Speaker 3: where the pandemic was not expected. A war in Europe
Speaker 3: wasn't expected, and they do send ripples for the entire economy.
Speaker 3: If that happens, we'll just have to be ready and
Speaker 3: then respond as appropriate.
Speaker 1: One of the themes of this conference is sort of
Speaker 1: what happens next?
Speaker 2: So what happens next?
Speaker 1: You're higher for longer now, and some think you're going
Speaker 1: to be higher forever, that we're not going back to
Speaker 1: low interest rates.
Speaker 3: Well, I don't think we're going to go Well, let
Speaker 3: me say this, I hope we don't go back to
Speaker 3: zero interest rates, because that means something will have happened
Speaker 3: that requires us to go to maximum support for the economy,
Speaker 3: and that would not be ideal for anybody.
Speaker 2: I do think.
Speaker 3: That our new steady state is likely to be higher
Speaker 3: than what people have known over the last decade, maybe
Speaker 3: back to where we were in the nineteen nineties and
Speaker 3: two thousands.
Speaker 2: But we'll just have to see.
Speaker 3: But I do think a strong important message people should
Speaker 3: have is going back to zero means that something bad
Speaker 3: happened in the economy and we want to avoid that
Speaker 3: as much as possible.
Speaker 1: Well, what do you say to people who want to
Speaker 1: move or people who want to buy a new car?
Speaker 1: Hold on, wait or how long do these industries have
Speaker 1: that they can hold out until you decide what you're
Speaker 1: going to do next.
Speaker 3: Well, I don't think anyone's waiting for us at disappointment.
Speaker 3: On the business side, you see in the auto space
Speaker 3: that producers and auto dealers they're adding incentives for people
Speaker 3: to buy their cars. We talked to lots of major
Speaker 3: sellers of cars. They're trying to move volume, they are
Speaker 3: trying to do those things. And I think for consumers
Speaker 3: it's really shop around, back to where we used to
Speaker 3: be and how the economy used to work. You got
Speaker 3: to go find where there are opportunities. They're out there,
Speaker 3: but people just need to live their lives. And what
Speaker 3: I'm finding and seeing is most of them are doing that.
Speaker 3: The housing and home ownership, that's a special case and
Speaker 3: people are locked into those. But even there, because we
Speaker 3: have remote work and we have people work in these
Speaker 3: hybrid situations, there are opportunities for people to continue to
Speaker 3: stay engaged in the economy.
Speaker 1: Well, a lot of people look at the housing industry,
Speaker 1: for example, and other areas that have started to slow down.
Speaker 1: And there's an argument that maybe you're going to be
Speaker 1: behind the curve in cutting rates.
Speaker 3: I don't think that that's really the right way to
Speaker 3: think about it. For me, our mandate is stable prices
Speaker 3: and maximum employment. On the employment side, we're still seeing
Speaker 3: many many jobs being created. On the inflation side, and
Speaker 3: the stable prices, we've still got a ways to go.
Speaker 3: And so for us and I think our given our mandates,
Speaker 3: we need to get that stable price pricing aside to
Speaker 3: where we need it to be, because at that point
Speaker 3: then the economy will be positioned to stand on its own,
Speaker 3: to move forward and to create a growth and prosperity.
Speaker 1: When you get asked when you're going to cut rates
Speaker 1: and you give the answer that you give, and your
Speaker 1: colleagues get asked and give the answer that they give,
Speaker 1: you've said as a group that we're not doing forward
Speaker 1: guidance anymore. But is this a forward guidance that you're
Speaker 1: doing any way, because it does seem like you're guiding
Speaker 1: the markets, or at least the markets are reacting to
Speaker 1: everything you say.
Speaker 3: Well, I think the markets have always reacted to everything
Speaker 3: we say, so, I don't think this is new. What
Speaker 3: I would say, though, is we are open to all
Speaker 3: possibilities and from here moving forward, there are scenarios where
Speaker 3: the economy is going to expand and accelerate, their scenarios
Speaker 3: where the economy might slow down faster than expected. And
Speaker 3: then there is my outlook scenario is slow in city
Speaker 3: wins the race.
Speaker 2: In all of those.
Speaker 3: Cases, there are policy prescriptions and we have to be
Speaker 3: ready for all of them. So in this sense, unlike
Speaker 3: in the pandemic or even the Great Financial Crisis, when
Speaker 3: we knew that most of the risk was on one side,
Speaker 3: now the risks are really balance, and so there isn't
Speaker 3: sort of a bias in one direction or another. I
Speaker 3: think that's the message to be taken. If you want
Speaker 3: to call that for a guidance, that's fine. I mean
Speaker 3: to me, I think in many regards that's life. Like
Speaker 3: life is you don't know something good that could happen,
Speaker 3: something bad could happen, and you just have to be
Speaker 3: ready for it.
Speaker 1: Well, you've got another month essentially before you have your
Speaker 1: next meeting, and you have to put.
Speaker 2: Out your forecasts.
Speaker 1: But it was a sneak preview of what you think
Speaker 1: growth and inflation are going to be like for the
Speaker 1: rest of the year.
Speaker 3: Well, I've been told many times don't scoop yourself, so
Speaker 3: I don't know. The way our process works is as
Speaker 3: we get closer to the meeting, I meet with my team,
Speaker 3: we really try to get a sense of where everybody
Speaker 3: is on this. You know, I have a bunch of
Speaker 3: great accounts in our building who have their own views
Speaker 3: and opinions about how the economy is going to move forward.
Speaker 3: I take that on board and we'll get to a
Speaker 3: narrative at that point. But right now, I'm just worried
Speaker 3: about this conference, making sure it goes off as well
Speaker 3: as it can, and I'm really looking forward to.
Speaker 1: You're going to be one just one dot by yourself
Speaker 1: on the dot pot when it comes out.
Speaker 3: Well, we'll see about that.
Speaker 1: When you look at the economy overall, does it surprise
Speaker 1: you still that we're seeing the strength and the labor
Speaker 1: markets that we are seeing. Are you hearing anything from
Speaker 1: CEOs about that turning?
Speaker 3: So what I've heard from from business leaders really is
Speaker 3: that today labor markets are weaker than they were, softer
Speaker 3: than they were twelve months ago, but they're not soft.
Speaker 3: You know, this is the question that we ask all
Speaker 3: the time because we need to know how the labor
Speaker 3: side of input to production is doing. But I think
Speaker 3: it's really important when we think about workers and the
Speaker 3: labor labor market is that before the pandemic, labor markets
Speaker 3: were tight. So I don't think we're likely to evolve
Speaker 3: to a place where you know, labor is going to
Speaker 3: be there's be many many people out there available for work.
Speaker 3: We're going to go back to where we were. I
Speaker 3: will say, you know, there's been lots of reporters showed
Speaker 3: immigration has been important and important contributor, and you know,
Speaker 3: we'll see how it evolves moving forward.
Speaker 1: Well, the big question that a lot of people Wall
Speaker 1: Street and I guess in a way Main Street are asking,
Speaker 1: is is monetary policy restrictive now? And is what you're
Speaker 1: restricting the problems in the for inflation or is it
Speaker 1: maybe stuff you can't do anything about.
Speaker 3: Well, I think that our stance is restrictive.
Speaker 2: Another thing we do.
Speaker 3: We have surveys and I ask people all the time,
Speaker 3: do you think that our policy stances preventing some things
Speaker 3: from happening that you would do otherwise?
Speaker 2: Every business leader says yes.
Speaker 3: Now, some of them say, it's changed my forecast over
Speaker 3: the next twelve months. There I have some cash so
Speaker 3: I can actually buy some things and don't need to
Speaker 3: use debt instruments for that. But everyone acknowledges to me
Speaker 3: that our policy rate is slowing things down, it is tightening,
Speaker 3: and that's what really gives me the confidence that we
Speaker 3: can get inflation back to our two percent target.
Speaker 1: Well, last question, we're obviously in a season where everybody's
Speaker 1: getting asked their feelings about the economy. Do you think
Speaker 1: we see any significant changes in the economy over the
Speaker 1: next six months?
Speaker 2: Say it's hard to say.
Speaker 3: You know, my outlook is the economy is going to
Speaker 3: continue to be growing, Inflation is going to continue to
Speaker 3: come down slowly, the economy will continue to create jobs,
Speaker 3: and the United States economy will continue to be the
Speaker 3: leading economy in the world.
Speaker 2: Will people feel that, Uh, You'll have.
Speaker 3: To ask them. So. I think one of the things
Speaker 3: I've heard is we don't have just one economy today.
Speaker 3: We have people that are on the lower end of
Speaker 3: the income and wealth distribution. They have spent gone through
Speaker 3: their excess savings. They are feeling somewhat where they were
Speaker 3: the same way as they were before the pandemic. Then
Speaker 3: you have a lot of other folks who accrued a
Speaker 3: lot of savings through the pandemic because they couldn't go
Speaker 3: on vacations, they couldn't go to restaurants. They're still in
Speaker 3: a spend mode, and so a lot of what I'm
Speaker 3: trying to do today is figure out how that all
Speaker 3: fits together to give a picture of how the aggregate
Speaker 3: economy is going to move forward today. What I'm hearing
Speaker 3: is that there's still enough spend on that upper end
Speaker 3: that the economy can continue to grow, but it is
Speaker 3: slowing down.
Speaker 1: Well, we will check in with you in a couple
Speaker 1: of months and see if anything's changed.
Speaker 2: Rafael Bostic, thank you very much for joining us. Probably
Speaker 2: the Atlanta Fed