We are so glad to have shopping expert in the Atlanta Airport. Atlanta FED President Rafael Bostik, who is with us here on site, really appreciate you being with us. President bos Tak, I want to start with a change in tone that we have heard from you over the past couple of weeks.
It seems like three.
Months ago you were not that urgent, urgently feeling like we needed to see lower rates. You've kind of changed recently and really seen the need for it.
What's caused that.
Change, Well, I think two things have really happened to lead for that change. First of all, good morning, It's good to see y'alls.
Good to see, really good to be here.
The one change is that inflation has moved a lot faster than I had anticipated. We've for the last two years have really been in a mission of getting inflation back to our two percent goal. We had seen a lot of progress early this year, it seemed like it may have been soling out. I'm really gratified to see that it's continuing back on that pace and that's a very good thing. And then the second part is the
employment side. So we know that unemployment rates have gone from about three point four percent to four point three percent. That's a big change. Now it's from super hot to solid right. So I don't want to make it seem like labor markets are a week, but it really starts to tell me that things are much more imbalanced than they have been for quite some time. And that's really a sign that our policy has done his job and now we need to start the path back to our more neutral stance.
More than anyone at the FED, you've got a more holistic view with John Show and at Stanford, with all the academics you've done in southern California about racism, about society and all. We're in the maelstream of a political election. Greg Yepp, writing in the Wall Street Journal in the last twenty four hours, says, the politicians are not practicing economics. How does the FED get to the September meeting, get to the November meeting and avoid the first Tuesday of November?
How do you maintain FED independence with this crazy economic dialogue here?
You don't think it's that hard to remain independent. I think for us, the job is to keep our heads down, do our work, read the data, study it, get input from businesses and people all over this country to get a good handle about where the economy is, how it's moving, and how people feel is going to move forward, and then use that information to figure out what the most
appropriate policy is. The worst thing that we can do is not do the right thing for reasons other than this not being the right thing right And to me, I think we must at all times be true to Our job is to set up a long run environment for this economy so that it's got a firm foundation, and that means we can't be focused and pulled into the shorter run issues.
So I'm just gonna keep my head down.
The FED has a long history of doing whatever it takes, whenever it takes, and that's what I expect we'll do too.
You've been criticized. The Fed's been criticized by a lot of people on Wall Street who say you're too data dependent, you're looking backwards too much. I don't think they realize that you're constantly talking to people in your district to get the current lay of the land.
So what is that lay of the land.
What are CEOs telling you about their plans and their view of demand and business going forward?
Well, you should tell people more often we spend a lot of time looking forward. That's actually a really important thing. We do surveys. Our bank has a lot of surveys that we do, asking what's your outlook for the next six months, for the next twelve months in the light we hear a couple things.
So one we.
Hear that the demand for product is weakening, but it's still quite solid. We hear that businesses are not expecting to expand their workforces in a very significant way, but they're also not expecting to light people off, that that is not the mode. That they're really in a steady state where they can handle where things are, and their outlook for the next six to twelve months is by
and large positive. Maybe a little lower in terms of revenues and profits from where we've been last two or three years, but last two or three years have been record breaking pretty much in every sector, every industry. So it's a solid picture, and it's one of the reasons why I do think that we've had some space to be patient with our policy moves and we'll just have to see whether their outlook plays out.
I'm hopeful that it does.
Given the problems least we talked about earlier with the data and coming out of the pandemic and everything. How certain are you that your data is correct enough that you're not behind the curve.
Well, I mean, we try really hard to get our view based on the pulse that business leaders are showing at every moment. We talked to folks day to day, week to week, and we ask two questions all the time. One, what's your outlook for the next six months, and how has that changed relative to where you were two weeks ago or three weeks ago. We are trying really hard to notice those inflection points so that we can speak to that, we can bring that to our policy table
and make sure that we're behind the curve. But this these are turbulent times, as you know. I mean, you'll recover the economy. Things are happening in unexpected ways in many different venues and many different parts of the economy, and so there is a natural trend. There's always some uncertainty, and we've just got to sort of navigate our way through and do the best that we can to get as much information so we can.
Make good policy.
What does gradual mean?
Oh, well, that's a very good question.
So to me, I think it is taking one step at a time and after each step, looking around to see how the economy is evolved.
Okay, what everyone's asking is really is that step twenty five basis points? Is it defty basis points? Does one mean gradual? And whatnot?
So I would say this the first step. It will depend on what the next couple data points come in. A couple of data points come in, and inflation is moving and unemployment is staying pretty stable. I think a move would be on the lower side. But there's a narrative that says inflation comes in super hot and maybe we don't move at all, or that unemployment spikes in an unexpected way and we have to move bigger. I don't want to really be sitting on any one action
as my modal expectation today. I'm really gonna let things play out. And you know, one of the things I've learned very much in the last four years is that getting too far out ahead of what actually happens just causes me. There's been a lot of extra energy that I wind up having to sort of undo and then get to where the reality is. So I really am trying as much as possible to be in the moment and of the moment.
Well, markets are forward looking, they're not in the moment. So everybody wants to know where do you end up? Where do you think neutral is going to end up when you finish your cutting cycle.
So I'll say two things on this one in the SEPs and the dot plus, we have to put a long run number for me. Right now, that long run number is three percent. I think it's a little higher than where it was the depths of the pandemic, but
where that is precisely is unclear. The second thing I would say, though, is I've really been focused much more on making sure that inflation gets to two percent than what a long run number is, and now that we're close to moving on that way, that's a question that I will spend a lot more time with my team trying to figure out. In my building, we started to have discussion slash arguments about this, and in my blood, I get views ranging from two and a half to four and a quarter.
Right, that's a large range, and.
We're going to have to narrow that down, and so I'm really looking forward to a robust discussion that will help me get a sense of where I think it.
Is two years ago, J. Powell's speech was eight minutes long. How long do you think this speech is going to be?
So you know, I don't get any insights on that. Eight is historically the record breaking short. I'm not expecting a break records today, but we'll have to see what happens.
Raphael Vostik, President of the Atlanta Fed, Thank you so much for being with us.