Episode summary
Fed’s Bostic Discusses Inflation, Warsh & K-Shaped Economy
Wall Street Week
· · 9 min · Guests: Raphael Bostic, Michael McKee
Summary
The guest said the Fed still has to keep policy restrictive until inflation is back at 2%, arguing that high prices have been entrenched too long and are especially painful for families already feeling precarious. He described the economy as still resilient but cautious, with businesses and consumers adjusting to tariff uncertainty and waiting to see whether conditions improve or worsen through 2026.
On the labor market, the guest said recent weak payroll and layoff data would not change his view that inflation remains the bigger problem. He argued that hiring is being distorted by structural shifts, including AI, post-pandemic right-sizing, and possible changes in labor supply tied to immigration. He also said the lack of timely jobs data makes it hard to read the economy clearly, and that meaningful signals may not emerge until April or May.
The interview also covered criticism that the Fed has strayed into “mission creep” and concerns about the institution’s independence. The guest rejected the mission-creep argument, defended bank supervision as appropriate risk management, and said the Fed should stay focused on its core mandate while being more data-dependent and open to nonofficial sources. On Kevin Warsh’s call for “regime change,” he said he did not know what that meant and defended Jay Powell as someone who should be allowed to succeed.
Key takeaways
- The guest said the Fed must stay restrictive until inflation returns to 2%, calling that priority “paramount.”
- He said the economy shows “cautious optimism,” with businesses and households adapting to tariff uncertainty rather than expecting the worst.
- He argued the labor market is being reshaped by AI, post-pandemic right-sizing, and labor-supply changes, making the data hard to interpret.
- He said weak employment reports would not alter his inflation focus because inflation has stayed above target for too long.
- He rejected claims of Fed “mission creep,” saying bank supervision is appropriate and the Fed should remain data-dependent.
Notable quotes
“we need to keep our policy in a restrictive posture so that we get inflation back to 2%. That's paramount”
“what has been true throughout the last year is a tremendous amount of resilience on the part businesses and consumers”
“the sentiment is one cautious optimism. But I put emphasis on the cautious as opposed to the optimistic”
“I think it’s very hard to make a clear statement, And then, of course, we don't have a jobs number today”
“-I actually don't even see the mission creep argument”
How the episode opens
We're speaking with the Atlanta Fed president Raphael Bostic, who is retiring at the end of this month. So this is sort of your HR exit interview. Mike, it's always good to see you.
I want to ask you, as you travel around your district for the past year, what's the mood like among companies and consumers? We've seen the surveys show that people are getting very, very pessimistic. - Well, I'd say it runs in two ways.
So, first of all, what has been true throughout the last year is a tremendous amount of resilience on the part businesses and consumers. You know, April 2nd, when the tariffs were announced at very high levels, that put everyone back on their heels and there was a lot of uncertainty. And what's happened through the year is, people have figured out ways to deal with that uncertainty.
So as for today, I think most businesses and most households are not thinking that the worst of the possible outcomes are going to happen. They're not sure they can get to best ones. But everyone's trying to find a state where they can get through So I think the sentiment is one cautious optimism.
But I put emphasis on the cautious as opposed to the optimistic, I think people are really trying to wait and see what happens. - Well, what do you think that means for the economy? Well, I think it means that the that we've seen for the second half of 2025, we will continue to see through 2026.
And, you know, I talked to a lot folks in the last six weeks or so, and they said, we think our experiences in October, November and December And then there are some reasons And then there are some reasons why they think it might actually get stronger, You know, the tariffs, people have gotten used to those.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed inflation target
- fed mission creep
- warsh fed chair nomination
- k-shaped economy
- atlanta fed outlook
Watch the episode
Watch “Fed’s Bostic Discusses Inflation, Warsh & K-Shaped Economy” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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