Atlanta Fed's Raphael Bostic on Monetary Policy During Extreme Uncertainty

SPEAKER_2 (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, we're here in Atlanta.

Joe Weisenthal (0:25)

I've never, I'm embarrassed. I've never really spent any time in Atlanta so far, but it seems lovely. We're in midtown. I had a Southern food last night.

Tracy Alloway (0:34)

I was gonna ask, how much fried stuff have you eaten?

Joe Weisenthal (0:38)

I have to be really careful, because I will devour the food while I'm here.

Tracy Alloway (0:42)

So I went out with our producer, Carmen, last night, and we had fried chicken, fried okra, fried green tomatoes. I think there were a few other fried things. It was so good.

Joe Weisenthal (0:51)

It was so good.

Tracy Alloway (0:52)

All right, but we're not actually here. We're not here just to talk about Southern food. We are actually here to interview someone very important, the president of the Federal Reserve Bank of Atlanta. And I think it's really interesting to be interviewing someone from the Fed at this particular moment in time, because just last week, we had an FOMC meeting. They decided to keep rates unchanged. But then just a couple of days after that, over the weekend, we had some pretty big news.

Joe Weisenthal (1:18)

Well, that's right. So obviously, it's an extraordinary difficult time for literally everyone to understand what's going on with the economy. The Fed in particular, people have talked about, oh, it's in a tight spot, right? Because there perhaps are signs of economic deceleration. There's the potential inflationary impulse of the tariffs. And the tariffs themselves keep moving. That being said, I was sort of a knock on wood between the recent detente, so to speak, with China, maybe things are quieting down. Maybe we'll at least have some trade policy stability for some period of time, which maybe makes things today slightly easier to understand or anticipate than they might have even been a week ago.

Tracy Alloway (2:02)

That is the big question. So why don't we get right to it? We're speaking with Raphael Bostic. He is, of course, the president of the Atlanta Fed. So, Raphael, thank you so much for coming on Odd Lots.

Raphael Bostic (2:12)

Well, thank you for having me and welcome to Atlanta.

Tracy Alloway (2:14)

Thank you.

Joe Weisenthal (2:15)

Thanks for having us.

Tracy Alloway (2:16)

So I'm going to start with the, I guess, the obvious question. But you know, last week after the FOMC meeting, you put out a statement saying that your baseline outlook is for the economy to be less resilient than you expected at the beginning of the year. Given the news over the weekend, a potential truce, at least for 90 days between China and the US, does that change your outlook?

Raphael Bostic (2:38)

A little. I would say the over arching message that I've gotten from the people I talk to and from our survey responses and other things, and it's the reason why I was comfortable with our policy action last week is that there's just a tremendous amount of uncertainty out there. And because of that, businesses and households as well aren't really comfortable making big decisions. And as a consequence, the amount of energy I would have expected to see in the economy is going to be less than, that expectation was at the beginning of this year. It looks like it's going to be less than that for the remainder of this year and then we'll have to see how things play out to determine how much less. But that uncertainty definitely is weighing on consumers and business leaders alike.

Tracy Alloway (3:27)

Joe and I have been joking about trying to get through podcasts nowadays without saying the word uncertainty. I don't think we've succeeded.

Joe Weisenthal (3:33)

It's literally never going to happen. That word comes up in every episode. But actually going back to Tracy's question, what does it mean the economy is less resilient? What did you mean by that term?

Raphael Bostic (3:45)

So what we've seen through the last several years is an economy where all the analysts had expected things to start slowing down. Yeah. Inflation went very high. We had challenges in terms of supply chains, which led people to worry maybe labor markets would loosen, people lose their jobs. Sentiment expressed a lot of concern. Consumers and households were all expressing their frustration with things. All those things would have suggested that you would see less economic activity.

Joe Weisenthal (4:20)

And the fastest pace of rate hikes in decades.