Federal Reserve Bank of Atlanta president Raphael Bostic spoke on inflation, policy interference and the debt ceiling in a keynote address Tuesday evening, closing the Fed’s two-day Financial Markets Conference in Amelia Island, Florida alongside Chicago Fed president, Austan Goolsbee.
Bostic, who has served as Atlanta Fed president and CEO since 2017, said during his remarks that he expects inflation to fall over time, but doesn’t predict rates will fall below the desired threshold before the year’s end.
“We’ve come a long way, but we’ve still got quite a ways to go,” Bostic said. “I think we’ll make some good progress, but I’m expecting it’s going to be a little bumpy.”
Bostic also said that business owners are actively working to restore wage increments within their companies that were thrown off-balance with the emergence of the pandemic in 2020.
“I think that we should just all remember that in many ways, this is still a pandemic economy,” Bostic said. “And the things that we’re dealing with are a byproduct of policy decisions, of business decisions [and] the experiences we had through the pandemic where a lot of people were home working, but still getting paid.”
Bostic said this imbalance of strengths in the economy supports his theory that inflation will reach its target without requiring major intervention in the form of policy from the Federal Reserve.
The Atlanta Fed hosts its Financial Markets Conference each year, bringing together economic leaders and experts from all over the country to discuss changes in the global financial market, along with the policies that may be implemented to counteract them. This year’s conference, entitled “Old Challenges in New Clothes: Outfitting Finance, Technology, and Regulation for the Mid-2020s,” focused on impending economic concerns, like inflation across various industries, and the technological advances sparking shifts in the financial system.
Bostic and Goolsbee also discussed the state of financial institutions in the aftermath of the Signature Bank, First Republic Bank and Silicon Valley Bank collapses. Bostic said that the bank failures of the past few months haven’t hinted at larger issues within the banking industry, but instead reveal discrepancies affecting a minority of bank owners nationwide.
“I don’t know that we have a crisis right now in financial markets,” Bostic said. “We have a small number of institutions that had risk management strategies that work less well than you would like, and the markets have made a judgment. And that judgment hasn’t led to a similar judgment for a large number of other institutions.”
The Fed presidents also talked about the potential debt ceiling bind, a crisis that could lead to a widespread economic recession if not timely settled by federal government leadership. Goolsbee said the impending dilemma affects many high-ranking parties and agencies in the credit and lending industries, leaving congressional representatives in Washington D.C. with one course of action going forward.
“As Chair [Jerome] Powell said, there really isn’t any alternative. [Congress] is going to have to raise the debt ceiling,” Goolsbee said. “The only question is, how much pain are we going to have before that happens?”
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