A Talk With Atlanta Federal Reserve Bank President and CEO Raphael Bostic

Just down the street from WSB’s Midtown studios stands a magnificent white marble building. Upon entering this building, visitors are greeted by heavily armed security guards and bomb-sniffing German shepherds. Welcome to the Atlanta Federal Reserve Bank. Raphael Bostic, Atlanta Federal Reserve CEO and president, runs this gantlet every day, and I recently had the pleasure of sitting down with him for a long conversation.

The Federal Reserve — or the Fed, for short — plays a critical role in our economy, and by extension, in American life. Founded in 1913, the most powerful central bank in the world has been charged with maximizing employment and keeping inflation in check. In the wake of the financial crisis, the Fed was also charged with maintaining stability in the U.S. banking system.


Despite the Fed’s critical role in our economy, the organization and its practices remain a mystery to most Americans. That’s why I wanted to interview Bostic for my radio show on WSB and “Money Matters With Wes Moss” podcast. He certainly delivered by providing some great insight to help us better understand the Fed’s role in our daily lives.

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Bostic is an economist with extensive academic and government experience. He took office in June 2017 as the 15th president and CEO of the Federal Reserve Bank of Atlanta. Bostic is responsible for talking to industry leaders and understanding business conditions in the Fed’s 6th District here in the Southeast. This territory includes Alabama, Florida, Georgia and portions of Louisiana, Mississippi and Tennessee. He is also a participant in the Federal Open Market Committee, which manages U.S. monetary policy.

Bostic graduated from Harvard University in 1987 with a combined major in economics and psychology. He earned his doctorate in economics from Stanford University in 1995.

We began our tutorial with an overview of the Fed’s primary objectives.

Why is price stability so important? Bostic explained that keeping prices in the U.S. stable and close to the Fed’s 2% inflation target helps Americans make decisions about the future with some degree of confidence.

Unpredictability and uncertainty are anathemas to an economy. If we had inflation of +10% in one year, then -10% the next year, people would be understandably hesitant to make significant long-term commitments. We are far more likely to spend more, invest in new projects, buy real estate, start businesses, and otherwise grow the economy when we have confidence that prices will rise at a slow, steady pace.

Stability is also critical when it comes to employment, according to Bostic. The Fed, he says, is really looking to achieve maximum sustainable employment. We don’t want to see 2% unemployment followed by massive layoffs during the next economic downturn. That sort of unpredictability and instability could very well drive unemployment up to 10%.

Until recently, full employment was defined as unemployment in the 5.5% range. That number has dropped to the sub-4% range, thanks, in part, to tech-driven efficiencies in the labor market. Workers and employers can now connect faster and more effectively via job websites, resume screening software, and on-site digital recruitment kiosks that allow job seekers to apply for a new opportunity over lunch.

Technology has also exerted downward pressure on inflation by reducing the production and delivery costs of nearly everything — from books to clothes to furniture to food to video entertainment.

Bostic offered some candid thoughts on two much-discussed topics, President Donald Trump’s unprecedented attempts to pressure the Fed into lowering rates, and the ongoing trade war with China.

According to Bostic, Federal Reserve board members are accustomed to being “told what to do” by talking heads on financial news channels and other opinion mongers. So, they don’t find it difficult to ignore presidential tweets. Fed decision-makers simply put their heads down and focus on the job of assessing business conditions in America and making decisions based on data and analysis.

The impact of the trade war will soon be felt on the U.S. home front, according to Bostic. Consumers will start to feel the effect of tariff-driven price hikes in the next few months. Businesses in the Southeast have not, in large part, been hit by the tariffs. But the on-again, off-again trade talks are creating uncertainty and leading to less business investment. Resolution of the trade war could prompt businesses to invest and boost their spending above current levels.

Atlantans will be interested to learn that Bostic considers the economy in the Southeast to be “a near-perfect replica of the U.S. economy as a whole.” Unlike the Northeast, which has a lot of eggs in the financial-service basket, or energy-centric Texas, Atlanta and the Southeast are not overweighed in one industry sector. This diversity gives Bostic valuable insight on the economy when he confers with Federal Reserve Board Chairman Jerome Powell.

Employers in the Southeast, Bostic added, are currently being forced to raise pay rates to retain employees. This point marks a significant change from the slow wage increases we have seen since the Great Recession. Says Bostic: “In the last six to 12 months, I’m starting to hear different things from employers. They are starting to show a continuing increase or willingness to start the auction on wages.” I hope he’s right.

Read original AJC article here


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