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00:00[CC may contain inaccuracies] I just have to put on the table a couple of things as we start. Number one he like to be called Rafael. So I want everyone to know that it's okay. They don't call you President Bostic. Also that I I'm not supposed to use the T word for transitory inflation. I may have to. We'll get to that in just a minute Rafael. I want to start with the reappointment of Jay Powell. What it means to the Fed or what it means to the Fed's ability to execute policy because a lot of people are saying hey without that cloud of uncertainty hanging over the Fed without the possibility of some political pushback depending on how aggressive they have to be in the fight against inflation for example the Fed now can really look at what's going ahead and move ahead more assuredly. More definitely. What do you think. Well first of all I want to say it's really good to be here. It's good to see you again Kathleen. And I want to also say that you know this decision really does take some uncertainty out of the Federal Reserve as an issue. And I think that's that's that's helpful for all of us. It means that we will be able to spend 100 percent of our attention and focus on really trying to discern what's happening in the economy. And I also say that I think the president made a fine choice. You know both Chair Powell and Governor Brainard are very experienced polished and effective policymakers. And they both have really managed this institution through really turbulent times and with a lot of uncertainty. So I'm looking forward if they are in fact confirmed they're working with them and continuing the good work that we've done so far. You know there are three seats open at the board of governors now including the vice chair for financial supervision. All right. Are these appointments a chance for the Federal Reserve to create more diversity at the Fed more diversity at the board. Well I think any opportunity where there's an appointment has the potential to increase diversity. I do know that this is something that the administration has talked about a lot. It's taking seriously and we'll just have to see how it turns out in terms of who ultimately gets nominated. Just last week you said that you had not yourself been contacted by the White House for any these positions that might be open. So now a few days later and with this big news under our belt have you talked to anybody at the White House or close to the White House about perhaps considering one of these positions. And would you or will you consider it if you are. Well it's still true I don't have any trips to Washington on my calendar. So. So we don't have to worry about that. You know we'll have to see in terms of if if anything comes up on what the actual parameters are. And then I'll make a decision at that point. But you know all that stuff is out of my hands. And so I don't really worry or think about that so much. I have a lot of stuff I have to figure out in terms of how the economy is performing and where we should be thinking about appropriate policy landing over the next couple of months. That's kind of where I spend most of my time thinking. And the other stuff will sort of work itself out as we as we move through the next couple of weeks and months. What are you on the record for. One more thing though you and the Boston Fed the Minneapolis Fed have just finished up 10 conferences on racism and the economy. You look at racism and banking financial services et cetera. From that standpoint is it important to feel that vice chair pursuit for supervision supervision of banks with somebody who understands firsthand what these problems are. Well you know first I want to say the series has been great and if people have not seen it it's a real opportunity to understand some of the structural barriers that have prevented people from fully participating in the economy. That's why I encourage folks to Google racism in the economy. Federal Reserve all of our sessions are on YouTube and it's been really an illuminating series to your specific question. I think that the important thing is is that whoever is in that role understands that capital markets and financial markets have had these challenges and barriers in the past and is sensitive to look out for them in terms of how we execute our regulatory policy and how banks go about their practices moving forward whether that needs to be someone who is actually actively been discriminated against or not. I think that's an open question but I think the sensitivity and the awareness is something that will be important for the next person who holds that position to have. So I want to come back to this question and Fed policy and this persistent inflation rise we're seeing now. A few of your Fed colleagues in the just in the past week have either said they they are certain that the Fed needs to speed up the pace of the bond taper or at least talk about it seriously. How about you Rafael. Well I think there are good arguments to be made that we really should be considering how fast we execute the taper. Now there's a lot of uncertainty in the market. Inflation as you noted is at a very high level. And I think it's important that if we need to be moving interest rates that we get the taper out of the way first. So a faster taper would certainly give us more optionality as we move into 2022 and see sort of where the data takes us. So I definitely think it's it's appropriate for us to be talking about the pace of tapering and being open to a faster one. We're going to see some more data between now and when we have to make that decision or have those conversations not really guide us. I think in having a perspective on what the appropriate pace is and whether we need to move faster well the next meeting was December 14 15. So you'll have that data in hand. Are you inclined to say gee you want to be talking about and maybe being in favor of finishing the taper say by the end of the first quarter instead of waiting till into the summer. Well that timing I would be comfortable with given the way the data has come in recently. But as you noted we'll have some more data that comes in that gives us a sense of what's happening both in terms of job creation and in terms of inflation. That will give me a sense of whether the volatility we've seen in labor market reports over the last couple of months are really real and also whether the heightened inflation that we've seen is likely to persist. My sense is that on the inflation side the numbers are still going to come in strong. And if the employment numbers come in equally strong I think that the case would be much stronger for a faster taper. But again we'll have to see sort of where that plays out. Rate lift off in 2022. Rafael you have your dot in that part of the chart already at the December meeting all of you will be revising your forecasts. You do it every three months and that's where you have a chance to change your dot plots. Are you thinking about possibly adding another 2022 rate hike dot to the dot you've already got there. Well you know going into every new submission where we do the dot plots I try to be open to moving in both directions. And so certainly I'm open for pulling forward another rate increase if that is appropriate. But I'm also open to the notion that we may have these things back depending on how things play out. Well I've been in the position of thinking that a rate increase in 2022 for lift off was going to be appropriate for several months now because given where my forecasts have been through the pandemic the economy has just performed a lot stronger and been much more resilient than I have projected. Which meant that my initial conceptions of when we would be at a point where I looked up would be appropriate. We're much further out than they are right now. So the economy continues with one strong. And we'll just have to see as I talk with my team in Atlanta and get their various perspectives and input as to where my dog bites were lined up. But the first one I still haven't wanted is to assure and we're going to have to see what it's all about. So you see a strong economy. A lot of people do. We're well past recession. Inflation is surging. And yet we still have the same kind of monetary policy extraordinary stimulus that was put in place back in March April of last year and add to that record peacetime stimulus. Another big fiscal package. Doesn't it seem like maybe the stimulus question in terms of hiking rates is is pretty kind of more cut and dried at this point. What's the concern about about starting to hike rates and not not overstimulating the economy and taking away some of the liquidity in the markets. It's helping ultimately to fuel inflation. Well I think there are really two issues. You know the first one is that we still have a global economy. And I think it's important that we think about all of the dynamics around our policy and our economy that we keep in mind that Covid is driving a lot of the dynamics that we've seen. I don't like using the G word. I'd much prefer episodic. And it's it's partially because we are in a Covid episode and there's still uncertainty. You know this is an international show. I don't have to tell the people who are watching our viewers that Europe right now is going through a Covid lockdown. That suggests that some of the energy and force might be less assured than what we've seen in the past. And so there is still that uncertainty which is one reason why I think it's appropriate for us to show some caution but do move in a definitive way that suggests that positions us really to be able to move our interest rates so low. So I'm not this is not game over. We're not done with this episode yet. And until we are I think it is still prudent to be to be evidence based as much as possible supply chains. When you gave that famous speech famous for me anyway about not saying the word transitory with the swear jar the word transitory to put the dollar in if you say I owe you a lot of money already. Rafael you talked a lot about supply. Change is one of the reasons you're getting a lot more worried about inflation. What do you see going on with the global supply chain constraints now. How long are they going to last. Well you know it's it's something that we ask our business contacts across the southeast the Sixth District all the time and we do some regional surveys we do national surveys as well. And in every instance what they are telling us is that they're not expecting this supply chain challenges to resolve before the summer of 2022. And some are even saying as long as 2023. So as long as that's the case there is I think going to be continued increased inflationary pressure. And we're going to have to be mindful about whether the extended nature of that pressure is going to result in businesses changing their business models and consumers changing how they think about participating in our economy. Because ultimately if this is an episode episodic situation and businesses all view it that way and consumers all view it that way so that we don't really see any lasting changes in behavior then there's very little for us to worry about over the longer term. But if you know a heightened inflation going on for a year or a year and a half there is the potential that we might see those behavioral changes which then could mean that all of our benchmarks are different in terms of what a baseline level of inflation we should expect to be and ultimately when maximum employment looks like. So there's a lot to figure out. We're going to continue to reach out to business leaders and consumers across the country so that we can really know how they're thinking and how they're approaching things. Just a quick follow on this because I want I really are our audience to realize that your district is full of big ports. You've got a lot of railroad trains going through there. Give me one anecdotal evidence or or a story about the problem how long it's persisting and what one of those contacts sees. Well you know we have some important for it's all over. You know we have Savannah. We have New Orleans. And in almost all these cases what we're hearing is we have backups in terms of the the container ships being unloaded. We are actually in some of this have shortages of container ships. And the issue of getting containers into the marketplaces be it trucks and trains has also been clogged up. I would I would say you know one thing I've heard a lot is we have shortages of truckers. And so even with containers get off off the ships we have a hard time getting the goods to market place. And that's something that we have done the challenge before the crisis. But it's only been exacerbated given all of that at the bottom that's missing it. How do you respond to these arguments that you must read about C tweeted et cetera that the Fed's falling behind the curve. And part of what some people are saying is look you're too focused on social concerns. This is like Arthur Burns back in the 70s. You're going to set the stage for a prolonged persistent high inflation just as that group of Fed officials did back then. I don't think that's right. Right now and I also think that people should understand that we are actually paying attention in this and it's something that I'm definitely concerned about on a daily basis. And when you look at where the market is in terms of inflation certainly it's high. But the thing that we focus on that's really important is inflation expectations. And in that area while we've seen the short run inflation expectations for both consumers and businesses increased to historic levels we've not seen the same level of increase when it comes to longer run inflation expectations. Which gives me confidence and comfort that business leaders and the public actually still have confidence that we haven't completely lost track of things. And we will act as necessary to make sure that inflation doesn't become this spiral that becomes very difficult to control. So I'm not worried about it but I am definitely looking at this very closely. I want to ask you to give us a little more if you can guidance on full employment maximum employment. I think a lot of people are wondering for example when we look at rate liftoff. Yes it's down the road but it could be around the corner before we know it. Do you have to see the unemployment rate broadly in the U.S. back to its pre pandemic low before you would vote for a rate lift off. Would you have to see the the black and Hispanic unemployment rates back down to those pre pandemic lows to vote for lift off. Or do you just have to see them moving in the right direction. Well for me I think about this in like a holistic more of a holistic perspective. So unemployment rates are certainly important. The number of jobs we have in the market and the number of people employed is certainly important. And the labor force participation rate is also something that's quite important. And when I think about the labor market right now what the most definitive characterisation I would use is in flux. We know that for many families they have not completely settled out on how they're going to participate in the labor market. You think about how uncertain the schools have been. You think about how devastated the childcare markets have been. And families that have children have a lot of uncertainty and have had a lot of uncertainty as to how they're going to manage things. And so until those things get sorted out it's hard to imagine that we're going to see the labor force picture get much clearer. I will say though that you know I'm optimistic that as we move further along as more and more people get vaccinated as we start to see schools get much more settled in their perspective that we will start to get clear answers on this. And when we do I think we'll get a good sense of where maximum employment is. Let me just say one other thing which is quick. I'm not exactly confident or are convinced that we have to have exactly the numbers that we have pre pandemic. I think that's a good target. But there are some changes that are going on with retirements as one example would suggest that it's a little higher than that might actually would still be appropriate.

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Bostic: Faster Taper Would Give Fed More Optionality

Federal Reserve Bank of Atlanta President Raphael Bostic discusses the reappointment of Jerome Powell as the central bank's chair, monetary policy and the prospects for the economy. He speaks with Kathleen Hays on "Bloomberg Daybreak: Australia." (There were some audio issues)

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