C. Peter McColough Series on International Economics With Raphael Bostic

Wednesday, May 12, 2021
Clodagh Kilcoyne/REUTERS

President and Chief Executive Officer, Federal Reserve Bank of Atlanta


Dean Emeritus and Russell L. Carson Professor of Finance and Economics, Columbia Business School; CFR Member

Raphael Bostic of the Federal Reserve Bank of Atlanta discusses how the coronavirus pandemic has exacerbated inequality in the United States, as well as solutions for increasing economic growth and employment.

The C. Peter McColough Series on International Economics brings the world's foremost economic policymakers and scholars to address members on current topics in international economics and U.S. monetary policy. This meeting series is presented by the Maurice R. Greenberg Center for Geoeconomic Studies.

STAFF: This event is presented by the Council on Foreign Relations.


HUBBARD: Thank you very much. Welcome to today's Council on Foreign Relations meeting with Raphael Bostic, President and CEO of the Federal Reserve Bank of Atlanta. I'm Glenn Hubbard, professor of finance and economics at Columbia University and it's my honor and privilege to preside over today's discussion. This meeting is part of the Council's C. Peter McColough Series on International Economics. And as you just heard, it's on the record. Dr. Raphael Bostic became the fifteenth president of the Federal Reserve Bank of Atlanta in June of 2017. He's currently a voting member of the FOMC, Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System. Before he joined the bank, Raphael was a professor of public policy at the University of Southern California in Los Angeles. He also served at the Department of Housing and Urban Development and spent several years as an economist at the Federal Reserve Board of Governors. He earned his PhD in economics from Stanford University and his undergraduate degree from Harvard. He's leading the Atlanta Fed's efforts to promote safety in payments innovation, which includes importantly partnering with fin tech companies involved in payments. He's particularly interested in working with policymakers and researchers to help find ways to make the economy work for every American. And he helps guide the Atlanta Fed's multifaceted program aimed at enhancing economic mobility and resilience. I can just say personally, that I know him to be not only a very strong champion of effective monetary policy, but really for a very deep research concern in our profession of economics, about well being more broadly than just the asset holders the Fed often concerns itself with, and I would commend to everyone the excellent macro trackers of the Atlanta Fed under Raphael's direction. And of course, we gather at an interesting time. So please join me in welcoming President Raphael Bostic to talk about policy, the macro economy, and inequality.


I want to dive right in. So today, we got news on the CPI. The CPI print this morning, startled some market participants and some economists, the Atlanta Feds own work has pointed to increases in expectations about inflation for businesses over the next years. And some prominent investors and economists have added to this commentary. What do you say to those who argue that the Fed is actually stoking inflation by maintaining its current policy stance? And how best should the Fed assure or reassure markets that inflation blips are transitory?


BOSTIC: Well, first of all, Professor Hubbard, it's really good to be here. Thank you for the invitation. And hello to everyone at the Council on Foreign Relations. It's really nice to be here. You know, the inflation question is a question that we have been facing for quite some time. I get this question pretty much every time I talk to folks as I go around the country. And I have to say that we're really in a turbulent time. And what I try to tell people is, this is a time when I would expect to be, there to be a fair amount of volatility in inflation. We know that if you look at year over year measures, this is May, their readings were from April. Last April, this economy was in a very different place. So if you just think about this, from a year to year basis, it shouldn't be surprise at the number looks pretty large, we call that a sort of a base effect. But then beyond that, if you look at a number of the other factors that might be driving prices, you think about lumber, the cost of lumber has tripled in the last from a year ago. And that's going to put upward pressure on prices.


You think about the supply chain disruptions around semiconductors that is associated with production and getting things through the ports, all of this, both of them driven, in part because of issues around the pandemic and shifts in demand. The real question you have to ask yourself as we think about these things, is which of these shifts and pressures are likely to remain permanent versus those that are likely to remain transitory? And to the extent that we think that there are that the pressures are going to be transitory. That doesn't say to me that that justifies any kind of policy response, actually, because it really doesn't reflect anything fundamentally different from where we were before. Now, I do have to say a lot has happened in the last year, and there have been many changes, both in terms of the demands from consumers and the types of products that they're buying, as well as how producers are thinking about their relationship to the marketplace, and what kind of prices they can charge, as well as the demands of workers. And we're seeing workers really start to step back and reflect on, you know, am I satisfied with my relationship with the workplace? A lot of folks got to stay home for a long period of time, and learn to value their time that they have with their family. So I think there's a lot of shaking out that's still to be done.


So what we're trying to do at the Atlanta Fed is really understand how businesses are thinking about their relationship to the marketplace. Are they seeing these price pressures to be likely to linger for a extended period of time? Are we talking three years? Are we talking one year? Are we talking six months? And those are the types of questions that will make a big difference in really determining what the underlying structural relationships are. Now, you asked about what can the Fed do to assure people and I think is really just talking about what we're seeing and be as transparent as we possibly can. And to me, I think another thing people should know is that we are worrying about this. I tell people all the time, I get paid to worry. And so it is not as if inflation is going to evolve in ways that might become troublesome and I'm not going to notice it. If I do see that there's evidence and then I'm going to speak up and I really advocate for policy moves. But right now, it's really too soon to say I think definitively that we're in that space.


HUBBARD: Thanks. Thanks so much for that, of course, as economists, we would worry for free. It's always nice to be, nice to be paid for it. I want to follow up on a couple of things. You said. Your comment about business people reminds me. So two part question one, what are business people telling you their views are on how transitory inflation is? And second, from your own perspective as an economist and Reserve Bank president, how long and or how large would an inflation spike have to be to shake your confidence that it's transitory?


BOSTIC: Well, you're asking, these are very hard questions. And, you know, you mentioned that we have a number of tools in our toolbox. One of the ones that's very important for us, is a survey that we do of businesses and this survey have been of inflation expectations. And the survey is one where we ask people where are your pressures? And how long do you think they're, they're likely to last? Now, one thing that's been very interesting through this whole pandemic is that the time horizon for events has really expanded. At the very beginning of the crisis, we as business leaders, how long do they think this is going to last? They would say, three to five months. And we're now fourteen months later, and businesses have really started to I think, understand that we're in a longer term enterprise or experience. So now businesses are talking, you know, we may see these pressures for six months or twelve months. And they're really starting to think about if it goes much longer, than how temporary is it? Or should we start to make different decisions about how we price? Right now, I think most businesses that we are talking to don't expect these to be permanent shifts. They're telling us that, you know, there are some circumstantial reasons why we're seeing pressures. But as we get to a more normal stance, they're telling us that they expect things to come back to something close to where we were before.


Now, I do want to emphasize in all of this, we are still very much in a transitional phase, right? So I know, for me, when in our household, we had to HAVE my niece and nephew stay with us, and they did a school for home. And that is still sort of a modal reality for many families. So until that gets resolved until we get to the fall, we know what a new steady state is, a lot of families are still going to be in flux in terms of the demands and what kind of labor they're going to make available to the workforce. I think businesses are recognizing that as well. And then we also have a bunch of changes around how people are working, what kind of goods are going to be provided? Are we expecting commerce to happen in person versus remotely? All of these things are decisions that have yet to be made to a final level for pretty much anybody. So, you know, in this transitional period, I think we're gonna see a lot of volatility in prices and in pricing, and it'll be our job really to use our surveys and other tools to look through it and try to figure out where the true signal is.


HUBBARD: Okay, I want to shift gears to the labor market, because you mentioned the issues in the past year that have obviously disrupted work for many people. And we're still at least eight million jobs short of where we needed to be from the pre-pandemic period. There are a lot of policy tools in the government's, in the Fed's toolkit, but from where you sit, what do you think the best policy tools are for increasing employment and wage growth and which of those tools belong to fit?


BOSTIC: Well, I think, for me, the most important tools for people to make sure that we have an economy that works for everyone, that we have a labor force that is appealing and attractive for the jobs that are going to emerge, is to make sure that we have an infrastructure that allows workers to get skills. So that starts with education, for sure. But it also deals very importantly, with workforce development. And the infrastructure, we have to allow people who have been disrupted from their jobs, to be able to transition and get those skills that will allow them to continue to be appealing and to compete for the jobs that are going to emerge. So at our Bank, we actually do a lot of work on workforce development, we have a Center for Workforce and Economic Opportunity. And we have a partnership with the Markle Foundation, and others called the Rework America Alliance, where we trying to bring together businesses, community colleges and educators. And then community based organizations that have relationships with workers to try to reconcile a workforce development infrastructure, find out what jobs are going to be coming down the pike, and then building training programs that allow people to get the skills so they can fill those jobs. Like that is going to be very, very important, because as you know, the economy has been evolving rapidly. And the skill set required for the new jobs is really quite different than the skills from the jobs that are being disrupted out. So we need to make sure that we have that workforce development infrastructure in place. And then you asked about the Fed, I think the partnerships that we're doing is one way to do this. Another way to do this is really to make sure that we have an economy that continues to grow robustly, and in a stable way. And so we need to make sure that our monetary policy really shepherds the economy that way. And I think that we're well positioned to do that.


HUBBARD: On that score, do you think the problems facing employment in wages are principally aggregate demand, where the Fed's tools are very important, or supply disruptions and work where the Fed's tools may be less spot on?


BOSTIC: I think right now, there's a little bit of both, I think the supply disruptions are significant. And, you know, I mentioned that workers are really trying to figure out what their place should be in the labor force, post pandemic. If you look at the statistics that are in terms of labor force participation, we know those numbers are down there, especially down for women. And you know, it's unclear right now, we're gonna do surveys to find out where people land on this, how much of that's going to come back, and what people are going to be willing to do. And so I think there is a real question about what the supply of labor is going to look like moving forward. And as we get a clearer understanding of that, that will help me think about what the appropriate benchmarks are for evaluating where the economy is and what his growth prospects are.


HUBBARD: Okay, I want to shift gears again, this time to a subject that is super important and that you have been a leader both in the Fed system and in the country in thinking about inequality. I start with a statement that'll be familiar to everybody. The trends in income and wealth inequality in the United States have been visible, at least since the 1970s. A few questions for you on that, what economic costs do you see of that inequality? And what roles do you see for the Fed to play in reducing inequality?


BOSTIC: Well, you know, I think about this, you know, one of the first things that really comes to mind is the sad reality or the unfortunate reality that in many communities, you're having wealth and having income is tightly linked to the degree to which you're going to have access to opportunities. You think about the networks that people have, you think about the quality of the schools that people go to, and you think about just knowledge of the rules of the game, like what sorts of things do you need to do to make yourself be noticed by employers and move ahead? They differ systematically by income and by wealth. And so when we see rising inequality, what it means is that there's a larger fraction of Americans who are not going to know the rules of the game, they're not going to have those skills. And so we're not going to be able to benefit from their full engagement in the economy, their full productivity, and indeed their entrepreneurship. So we lined up with an economy that is less than it could be, less resilient than it could be in less innovative, than it could be. Now, there have been some studies on this to try to quantify this. Some colleagues of mine from the Federal Reserve Bank of San Francisco, as one example, did an analysis where they said, where they found that inequities by race and gender cost the economy about $3 trillion on an annual basis. That's real money. And that's real productivity and output. And if you compound that, over the years, it just says to me that we could have an economy that is so much stronger, so much better. And I think that, given that, you know, one of our purviews is to try to see our economy be strong. Talking about this and highlighting these issues is important. Now, in terms of our tools, I think that one of the important things that we've done in the last a year or so is really articulate a different approach to our long run framework in executing monetary policy to say we're glad to not be so preemptive and be presumptuous that we know that when employment is rising that inflation is sure to follow. What we've seen in the last decade or so is that it's not really clear that inflation is sure to follow. And by being preemptive, we may be preventing a lot of people, many of whom are in those parts of the economy or are less attached to those economy, those parts of the economy that could have participated. So by holding off and letting us have to see inflation before we move in those directions. My hope is that that will lead more people to get attached and attached in a stable and sustainable way. We should really help with this.


HUBBARD: It is certainly true that the Fed's letting the economy run hot does give that potential. Since the great financial crisis if you were to look at monetary policy, do you think it is helped or exacerbated inequality? In other words, there's sort of two schools of thought: one is that by assisting economic recovery, it has certainly lessened inequality by giving people employment and wages. On the other hand, very accommodative monetary policy tends to reflate asset values, which would accrue to the benefit of asset holders who are by construction more well to do people, how do you sort that out? Is the Fed been a plus in this inequality debate since the Great Recession?


BOSTIC: So I actually don't think that's the right question. And mainly, you articulated one of the reasons why, which is initial conditions, make it impossible for us to facilitate growth, without seeing improvements in value growth, will value of assets, growth will sort of inherently do that. What I think is actually more important is thinking about is our policy contributing to families that didn't have assets, or have fewer assets, have a hope of getting them? And I think on that front, our policies have been quite effective. And right before we got to the pandemic, you know, unemployment rates for African Americans were at historic lows, unemployment rates, overall, were at historic lows. And I think that that's the kind of dynamic you have to get to, you can't benefit from asset growth unless you have assets. And you know, if we're going to see wealth grow, we need to make sure that those at the low end of the wealth distribution, or the no end of the wealth distribution, actually have some assets that then can accrue that wealth and start to get them on that trajectory.


HUBBARD: I want to go a little deeper in the inequality subject in another area, but which you have written and have been a spokesperson, you wrote an essay called Moral and Economic Imperatives to End Racism that I at least found very persuasive and important. How do you think that inequalities in income and wealth now by race should guide monetary policy if at all? And what tools does the Fed have to affect progress there?


BOSTIC: So you know, it's interesting, when I started this job, I looked at our mandate, and I said to myself, you know, we need to make sure that this economy works for everyone, like maximum employment needs to be maximum employment and to me that we need to get that number to be as high as it can be in a sustainable way, including those who may not have been attached as systematically to the labor force. And that includes people of different races. And we know that the unemployment rates for African Americans have historically been three to four percentage points higher than for the general population. And that's a problem. And if we look at the causes of those of those, those disparities, structural racism and the systematic rules that prevented African Americans from gaining wealth and participating in particular types of occupations, those things all contribute to the disparities we see today. And so I think it's as we've think about how do we get our economy to grow stronger and faster, and to be more inclusive, and to work for everyone, we've got to acknowledge that those barriers exist. And those realities were in place. Now, in terms of what the Fed does, you know, I talked about our long run framework and our different approach to economic growth. I think that's one way. But there are other ways, you know, one is to convene, and to really drive and create venues and forums where people can have conversations around these root causes, you know, and an example of us doing this is the racism and the economy webinar series that we've been running since last fall, I think has been a great series. But we're really trying to talk about not just what is the problem, but what are some solutions that people should be thinking about in trying to make amends for some of the disadvantages that the system has imposed on people.


A second thing that we do is we do research. And so we, you mentioned some of our tools, we have a number of interesting data tools. And I have staff at the Bank that are doing research on things like evictions, wealth stripping devices, such as heirs property approaches and contract for deed sales. But it's a way that people might be thinking they're approaching homeownership, but actually never accrue any equity. We also advise local governments on ways that they might make make amends on this one program that we have is something that I call the benefits cliff for advancing careers. And the benefits cliff is an idea that when you are on say welfare, or food stamps, or housing vouchers, if your income exceeds an eligibility threshold, for every dollar, you gain, you lose it all and benefit this dollar for dollar. If you're a family that's on multiple sources of support, if you gain one dollar, you're actually losing maybe three or four dollars. You're worse off. And so the incentive is not for that person to actually try to advance their career, because they will put themselves worse off and in some instances, they're worse off for ten or fifteen years. So you start to do that calculus, that makes a big difference. So you know, my research director, Dave Altig has a team that has put a spotlight on this, and has really made the point to local governments, we need to change our incentive structures to give people incentives to make themselves better and put themselves on a path to self sufficiency which should also translate to improvements in wealth.


And then the last thing we do is that we promote things that work. And I mentioned in the racism in the economy series, we taught we're looking at solutions. Our centers and workforce development and other areas are also trying to lift up practices around apprenticeships and internships that we're seeing are putting people on very different trajectories. So those last four sets of things are not things that people often think about in terms of what the Federal Reserve can do or does do. But I think they're super important in broadening the coalition of people who are engaged in this, and really challenging the conventional wisdom that whatever the institutions we have today, that's what we're stuck with, I actually think we can do better than that.


HUBBARD: That's great. I want to switch gears again to a topic that isn't in the Federal Reserve's direct purview, which is fiscal policy. The Fed, of course, doesn't have anything to do with the design of fiscal policy. But is there a Fed view about whether a fiscal expansion could be too large in terms of the way you all are thinking about monetary policy? And how would the Fed determine that? So I'm not asking you about the scope of fiscal policy or particular bills, but just in general, is there such a thing as too much of a good thing?


BOSTIC: So I got to start by saying, I can't tell you what the Fed thinks I can only tell you what I think on this one because I haven't had extensive conversations on this. You know, I think it matter, it depends on the context. So in the context of the pandemic, you know, I've said many times that I thought that it was important that the bridge that we are producing through fiscal policy be large enough to maximize a number of families and businesses that get to the recovery phase with a minimum amount of damage. Because to not do that, well might lead to many families and businesses in a much worse situation, which will make recovery all that much more difficult. So I think that's one dynamic and where size and larger might actually be better. In other instances, it's going to really depend on two things, one, the extent to which it's paid for, so I think spending and deficits are things that we must pay attention to. But the other part is really about what the money is being used for. You know, when I talk to business leaders, I go around the chambers of commerce and Rotary Clubs, you know, I make the point that pretty much everyone in the room has spent and used debt. Debt in and of itself is not necessarily a bad thing if the debt is used to produce something that puts you in a better trajectory, or gets you to a better place. So when thinking about all of these sorts of packages and expenditures, now one question that we ask and that I ask is, you know, is it going to be used for things that make us more productive? Because we can potentially leverage that to be stronger and better position than if we didn't actually spend that money?


HUBBARD: Okay, I want to ask another question about consequences of monetary policy. There's obviously a lot of attention as I began with about price inflation as a consequence of changes in monetary policy. But another way in which very aggressive monetary policies can show up, it's not just to price inflation, but in froth in financial markets and financial stability risks, and the Fed has commented on those risks recently, and I know you all monitor them closely. How worried are you about the potential for financial stability risks in this volatile period that you've, you've mentioned? And do you see any of those risks connected to the Fed's monetary policy in any way?


BOSTIC: So as I said earlier, I get paid to worry. So you know, I do think about the possibility that risks are emerging, as the economy runs very strongly. And so one of the things that I do as I go around and I have my team do as well, is we ask people, are you seeing transactions that make you nervous? Are there are deals that you're being asked to participate in that where you're adjusting the standards by which you're judging its appropriateness? And right now, I've got to say, we're not seeing that on pretty much any front. There is uncertainty out there and certainly there's risk out there. If you think about the demand for office space, for example, because we know that, you know, a lot of workers are working from home, there's a question about whether businesses are going to decide that they need the same amount of office space. And that will have implications for the profitability of large real estate projects across the country. But in many of these instances, those leases are long term leases, they haven't come due. And so the question has been called. So right now, we're not seeing that I'm not seeing excessive froth in financial markets. And so, so I'm gonna keep watching it. But I'm not feeling that bad right now. And in terms of what our policies are doing, you know, I go back to what our mandate is, our mandate is stable prices and maximum employment. And I'm going to stay focused on that and thinking about whether our policy is appropriate, while at the same time staying mindful that if we see financial instability emerge, that may be something that we have to consider and address.


HUBBARD: I do want to remind members that not too many minutes will be turning to you for questions for President Bostic. So I have another question going back to the conversation we were having a few moments ago on inequality. The Fed is an enormous recruiter in our profession. So how can, does, should the Fed use that power as a major recruiter to shape diversity and inclusion in economics profession?


BOSTIC: Well, I think the fact is that, you know, the Fed system is the largest hire and employer of economists every year in the system. And so in that, in that space, I think we do have an opportunity to drive change. And frankly, I think we can do better on this. We've been having a lot of conversations. And let me just step back and say, you know, I started at the Fed in 1995, a long time ago. And we were having this conversation then. And I spent a lot of time going to historically black colleges and universities trying to recruit young African Americans and young Latinos and others to come to the Fed, be interns, then try to get PhDs. Those didn't work. I know, clearly, we're still talking about it, you know, several decades later. And so it's really got me reflecting on what things can we do? So one, I think we have to remain intentional in reaching out to people in all corners who are pursuing these degrees. And, and really making sure they're aware that the Fed is out there.


But I think there's another problem, which is the pool. If you look at the number of just minorities who are getting PhDs, the number of women who are getting PhDs, you know, they're disproportionately low relative to their representation in the general population, I think thirty of econ PhDs are women, fifteen percent are African American, Native American, or Latino. Right, those are very low percentages. So for me, I also think that we have to do better in improving the pool and growing the size of the pool, getting more people to see economics as something that they should be participating in, that they can participate in, and where their voice will be welcome. And I know that, you know, in some instances, people are not feeling welcome, even when they're interested. And I know in other instances, people have been discouraged from very early on from participating in these fields. You know, I think about what little girls and African Americans hear about their abilities and expectations of them when they're in second grade and third grade, and in fifth grade. As to if they're struggling with something, will the teacher and to what extent does the teacher say oh, that's okay. You know, you little girls don't do this anyway. And I worry that that message gets into people's minds at very early ages, so that by the time they get to college, they don't think about economics as a possibility. They don't think about finance as a possibility. So one thing that we're doing at our Bank, in partnership with Reserve Banks in Philadelphia, St. Louis, and Richmond, is we're building curricula on these issues, for fifth graders and for eighth graders. And we're actually going to run pilots where we're going to work with local school districts. We've got some teachers that are lined up to deliver these courses. Because we think it's important that we have excellent training, and positive reinforcements in these areas from the earliest stages, where so everybody knows that they can be good at math, everybody knows that economics is important and interesting, and everybody feels that it may be something that they should consider as they go through their lives. And I'm really excited about it. We're going to actually do this in a scientific way. So we're going to do a pretest. We're going to go through the curriculum, we're going to do a post test, make sure that it's something that sticks with the kids. And I'm hopeful that it will over time, get us a much larger cohort of women and minorities who like economics, and who consider it as a profession.


HUBBARD: Oh, thanks so much. At this time, I'd certainly like to invite members to join our conversation with their questions. And just a reminder, again, that this is on the record. So I'll turn to the operator for the first question.


STAFF: We will take our first question from Emerita Torres.


Q: Hi, thank you so much. I'm Emerita Torres, with the Community Service Society of New York, Vice President for Policy and Research, fascinating conversation. You know, as you've discussed, the COVID-19 pandemic certainly exacerbated socioeconomic and racial inequalities and labor inequalities. And one thing that's come up a lot recently has been a portable benefits model, looking at benefits that can carry alongside an individual rather than be provided by an employer. And this could be you know, for health care, for childcare, even for workforce development training. And so I'd love to hear your thoughts on whether you think a portable benefits model is feasible, practical, and useful to push us towards an equitable recovery. Thank you.


BOSTIC: So that's an interesting question. I'm actually not that familiar with the portable model of benefits. I will say that, you know, from a just a general notion, portability is something that is, I think, important to consider. When you think about the things that that people worry about, and particularly lower income people that are already on the edge and so many dimensions, if there's uncertainty about whether the supports they have are going to persist, or whether the avenues for advancement are going to suddenly disappear. That's an extra source of stress that they are going to have to endure and carry with them. And we know that when people are facing higher levels of stress, they actually make poorer decisions. And that's true, whether you're rich or you're poor, the stress itself can introduce that. So I think it's something to definitely explore. I do think that there have to be a fair amount of coordination across employers if this was going to succeed. But I think with intention and purpose, this should be something where we might see a coalition of businesses that agree to pursue that. So it's very interesting as an idea and I'll actually think more on it.


HUBBARD: Okay, next question.


STAFF: We'll take our next question from Fred Hochberg.


Q: Thank you for excellent conversation. I served at the Export-Import Bank under President Obama and wrote a book on trade and training. So my question is, you know, before COVID, you know, AI was coming in and greater digitization of the economy, which is going to be very disruptive to jobs. So how does the Fed even begin to think through what would full employment be because it's not people going back to their old jobs. That's part one. And part two, we haven't been terribly successful as a country on retraining people. We haven't put the money in. And we haven't been very innovative about it when we tell people lifelong learning. And if you just wait, if you only have a high school degree, the idea of going back to school is not an exciting proposition. So one, how do we think about new jobs and how do we kind of do a real reset around training people for a different economy than we had even two years ago? Thank you.


BOSTIC: Well, thank you for those questions. And they're deep questions that we think about a lot. On the second point, I actually think that there are really several classes of jobs that are available right now. And some of those classes don't require extensive education. So we have a tool on our website called the opportunity occupations monitor, which at a county level shows those jobs that are plentiful and are likely to be plentiful over the next several years, that don't require you to get more than about one or two years worth of training. They'd be things like nursing and the like, where the certificates are available. And so one approach we've taken here is just to put information out to say, you know, as things evolve and transition, there are still opportunities out there. And I think that's an important thing. And those opportunities don't require don't have gigantic hurdles for you to get to. Because if you've been working on something for five, ten, fifteen years, the prospect of trying to re-skill can be quite daunting. Now you actually notice something that I think is very important, which is that we don't have a strong track record in successfully doing workforce rescaling and retraining. That's one of the reasons why we are we've approached this to try to create that track record on the fly. So I mentioned the Rework America Alliance, the goal there is really to provide examples, real world examples with local context that shows this can be done, and it can be done successfully with collaboration. But differently than I think some people conceived of this is not just a public sector program, it really is a multi-sector partnership that can lead to that positive change.


And then to your last question, which was actually your first question on, you know, how do we think about full employment in a mechanized, digital AI world? One thing that has been very interesting, as I've gone around my district, I've gone to plants and, you know, asked them, you know, as you've introduced technology, what's happened to the number of jobs? And what they've told me is that the number of jobs is they're comparable, they're not exactly the same. But the nature of those jobs has changed. So I think the issue that we face in this is, is I think less how many jobs are going to be there but who's going to fill those jobs? And as these transitions happen, how do we manage the risk that some people, if they don't get re-skilled could be left behind entirely? And so I'm trying to make sure that that question, and that issue stays forefront in the mind of policymakers. As we talk about the future of the labor force in America, and how work gets done and how goods get produced.


HUBBARD: Next question.


STAFF: We'll take our next question from Marsha Echols. Ms. Echols, please accept unmute now button. Moving on, we will take our next question from Jeffrey Laurenti.


Q: Hi and forgive me for asking you much more of a foreign relations kind of question. Go back a dozen years ago, President Obama and the heads of the G20 countries and their central banks were all on an emergency basis impressed into a coordinated response, coordinated stimulus to deal with the financial meltdown. By comparison, one here is almost no chatter about international coordination and responding to the economic impacts of this global pandemic. And aside from Treasury Secretary Yellen's moving a global corporate tax convention, there's almost no talk of international coordination at all. Are the concerns about jumpstarting economic growth now, not transnational? Are the concerns that you and Professor Hubbard have been discussing about inequality, excluded groups, strictly national, and not appropriate for coordinated international policy? What's the CFR question here?


BOSTIC: So, Jeffrey, thank you for that question. And I have to say a couple things on this. So one, I actually think there has been more international collaboration and coordination than has been in the news. I think about in the very early days of the pandemic, we at our central bank had lots of conversations that have continued on about how we, as central banks across the globe, need to be aware of what's happening, and think about how we position our policies so that they don't work across purposes to each other. So I think that is going on, I would also say that I know and I can just speak for myself, I am talking to international people continuously. Just yesterday, I had a meeting with consul generals here in Atlanta from Europe, from the EU, to talk about ways that we might work together to promote growth and support each other to make sure that as we come out of the pandemic, we do so in a in the most effective and strong way. So I think there are many of these things that are going on. Some, many of them may not be making the headlines the way they did during the great financial crisis. But the nature of this challenge is a little different. And I think that may be one of the reasons that's driving that. Before we go to the next question, I want to actually come back to a theme you answered a couple of questions ago, I think it was Mr. Hochberg's question. I said, you say quite rightly, the importance of public private partnerships in promoting new jobs and re-skilling, I think of things like community colleges and local employers. The Federal Reserve, of course, is organized in districts. And so you have a district and other regional banks do, is there a role for the Fed in trying to help that coordination among local businesses, local educational institutions, because you're not just Washington directed? You're in Atlanta and San Francisco and Chicago, etc., etc.?


HUBBARD: Yeah, so we spend a lot of time in what we call system meetings, where we bring people together from all the twelve Reserve Banks and the board just to talk about the things that we're doing and what we're learning. And, and one of the things that I really appreciate from that system, from being in the system, is that I can be a megaphone for learnings that happen in other districts to make sure that as things happen, and we see things that work, we're all letting everybody know, because one thing that is that is very, very true. We know that those that are working in local government, those that are working in state governments really don't have the resources or the time to be scouring journals to figure out, which demonstration projects have been the most effective. So there is a very strong and clear need to have an institution that will do that for them, and then provide that knowledge in a digestible and accessible way. And that's something that we've really stepped forward on. And, you know, since I've been at this bank, I've really emphasized for our team engagement with policymakers is where it's at. Just creating knowledge just for knowledges sake is not enough. And if we can get out and get that knowledge deployed, we can start to see change, it really makes a difference in people's lives. Thanks. Next question from the operator


STAFF: We'll take our next question from Jeff Rosensweig.


Q: President Bostic the question is going to be is this time really different? I'm sure in your career, you often hear we want to do something about systemic racism in the job market. Everywhere I go, I'm a business professor at business school at Emory University. People tell me they want to hire black persons, black students, firms, ten firms if they were going to hire a million black people? Do you think this will go away? Or do you think this is the different time when we're moving toward an unemployment rate for instance of black persons similar to that of white persons?


BOSTIC: So you know, it's an interesting question. I actually am optimistic that that things are different this time. And I'm you know, as I'll put it like this, when we were in the throes of the social unrest around the murder of George Floyd, the conversations that I had in my bank, with business leaders across the country, and many of them here in Atlanta, I think, Jeff, maybe you were in some of these conversations, just had a different air to them. And it was almost as if there was a recognition in a very deep way in a deeper way, that this is a societal problem and it requires a societal response. And as we've continued on so the metro Atlanta chamber, for example, has a racial equity pledge that more than two hundred businesses I've taken. And the thing that I think is really different here is that it's not just a pledge, it is, it involves a playbook of actions that will be taken to try to change the reality, the on the ground reality, and make sure that access is real for all people. And those sorts of things I've never seen in my professional career before. And that gives me hope that, that this thing, that this these efforts will endure. And this time will be different. But of course, time will tell. And I will just say, in my efforts and my engagements, I'm going to do all I can to make sure that that the focus does not get distracted on to other things. But that we really do continue to emphasize the importance of making sure that this economy really does work for everyone, and that everyone has access to opportunity, because we just can't afford to let people be on the sidelines, and not be able to be able to contribute their one hundred percent.


HUBBARD: Excellent, excellent point. On that, do you think there are things that public policy or the Federal Reserve in particular can do to help underrepresented minorities build wealth, build networks? Are there things that are barriers from a policy perspective that could be removed as well as activities by business and other groups?


BOSTIC: Yeah, I think I think there are a lot of things and you know, some of its policies, some of it's just practices. And a lot of it actually is not super complicated. So I'll just give us one example that we're doing here that our bank. We've started up a partnership program, with a local high school in a disadvantaged neighborhood, a neighborhood that has not historically had access to, to the networks and the expertise, and the exposure. And the thing I really like about this is that it's a program that one employee at my staff decided was important to do. She did the research, she found the school, she found the partnership, and she came to us and said, look, you guys can do this, it doesn't cost you know, $5 million and you will change people's thinking about what's possible. And you know, for where we are in Midtown, here in Atlanta, you can go maybe three miles from here, and there kids who have never really heard of the Federal Reserve who have never thought of the Federal Reserve as a possibility. And you know, that's a tragedy. And so we're we need to do more and do better on that. So those sorts of policies and just approaches to engaging our communities, I think can make a big difference. You know, I've said many times, one of the things that really makes me sad is when I hear young people that don't dream big, like super big. And I think part of that is the exposure and the world that they live in, has not given them the license to do that. And so it's it behooves all of us to try to change that, and allow kids to dream because when they dream, they'll strive. And if they strive, they'll get further than they would otherwise.


HUBBARD: Thank you for that. So let me turn back to the operator for more questions.


STAFF:  We’ll take our next question from Krishen Sud.


Q: Yes, hi. This is Krishen Sud from Civic Healthcare. I was just wondering when you know, going back to the inflation discussion, can you in any way quantify the base effect for the rest of this year? And as you look out for the rest of this year, do you feel that there's a certain time, when given all the gyrations we have had last year when we get back to what we would consider more of a normalized inflation environment? Is it Q3, is it, you know, really starting in '22? Just curious what your thoughts are on that.


BOSTIC: That's a very, very good question. What I would say is, I'm expecting a lot of volatility, at least through September, and then we'll have to see what's happening with the supply chain disruptions and the commodity prices and those sorts of issues. So for the next four to five months, I think we're gonna see volatility, and there's going to be a lot of noise that is that surrounds the true signal. I'm also hopeful that we will get signs through our survey responses that will really give us a sense of whether there's a fundamental rethink happening among business leaders about how they think about pricing, and how they think about wages and, and what they see is their ability to pass through increases in input costs to the final product market. If we see those changes, and they seem to be sustaining, that may be other information. But I don't think we're going to get a clear, clear signal on this, to say for sure that the transitory things, that there are things other than the transitory things that are driving this, but I'm going to keep looking. So next through the summer, I think it's going to be hard. After that, I think, then we'll have to look in earnest.


HUBBARD: I'll return to the members again, your answer there makes me think of a follow up question, which, you know, the Fed has shifted its inflation targeting toward an average inflation target approach. Do you think this is working well, in practice and toward these ends of communicating what's transitory and what's not? Do you think the Fed is communicating this well? Does the Fed believe inflationary expectations remain fundamentally anchored in the new approach?


BOSTIC: So to the last question, I think, you know, there, we need to work to make sure that expectations are anchored. I don't think that there's something inherent that says expectations are always going to be at a certain level. And so the communication then becomes really important. Right, before we had the pandemic, our institution had really struggled to get to our two percent inflation target. And I had a real concern that the expectations were starting to shift, such that people saw two percent as a ceiling, as opposed to an average. So I think by being more explicit in talking about this as an average that has been extremely helpful. And now the burden becomes letting it play out and not at the first sign that inflation is above two percent, taking dramatic actions, because that might signal that we actually are acting it that is like it's a signal, like it's a ceiling. So for me, I think that communication was important to start, I think it's been very explicit. And most people really do appreciate that we're going to be comfortable with inflation above two percent for some time, to make sure that the average is two percent over a period of time. And that's kind of where I am on that. I think the last thing I would say is, when people ask me, like, how long will you be above two percent? I think it's very hard to say that for sure. I will say though, that the trajectory of inflation once we get above two percent is going to be very important to me. So if we're at 2.3, and it stays at 2.3, relatively stable, for a period of time, that's not going to be a source of concern. But if we go from 2.33, to 2.5, to 2.8, to 3.0, over several quarters, to me that that sends a different signal. And so that's the sort of thing that I'll be looking for as we go through the next several years.


HUBBARD: Okay. Oh, operator do we have another question.


STAFF: We'll take our next question from Chris Banks.


Q: Thank you. This is Chris Banks, senior director with Itochu international in Washington. Good to see you, Raphael. I have a question. If we could turn back to one of the issues you talked about before, about how you are not seeing any evidence of froth in the financial markets. And I wonder if you might comment on the housing sector. And if you see or are concerned about any froth in that particular market? We know as you mentioned, lumber prices have tripled. You know, housing prices overall, are up, you know, double digits, we have, you know, record low inventories. So, are we headed toward another housing bust, like we saw before the financial crisis? Or is this time different? And if so, how is the Fed thinking about this? And how's the Fed thinking about the risk to the real estate sector in general? Thank you.


BOSTIC: So Thanks, Chris. And I would say the housing market has some basic fundamentals of supply and demand that would suggest the prices are going to go up. You mentioned the low inventories. So no, through the pandemic, I think uncertainty has driven many families to say, this probably isn't the time for me to put my house up for sale, I don't have a lot of the same amount of certainty about whether I'm going to still have a job and what incomes gonna look like and that kind of stuff. And that coupled with the wealth that many have is putting upward pressure on prices and, and so in the existing market, the pressures are significant. And then if you move to the new build market, the input prices have gone up considerably.


I was talking to a builder a couple weeks ago said you know the increased cost is the cost increases are at the margins of about forty percent, above where they were before. And that's going to put upward prices on, upward pressure on prices as well. So I think those fundamentals would suggest that the market is playing out as the market is going to play out. The one thing that is absent that I've seen is really high-risk lending. So we're not seeing the rise of subprime lending in the same way that we have before. And I'm also not seeing reports or anything to suggest that some of the fraud that was happening in terms of reporting income or those sorts of activities is going on here, either. Rather, there are some challenges that that we're facing, that the buyers are facing, because there's so many other buyers out there. And in some markets, I would also say that we have institutional engagement companies that are buying property, single family homes to rent them out, that has become a much bigger portion of the market since the financial crisis. So right now, I don't think it's fraught that way in the same way that we saw in the great financial crisis. That's not to say the prices are always going to go up. But if there are changes, there'll be from basic market forces.


HUBBARD: Are there places, if I could follow up on that, that you and your colleagues look at to consider fraught? So for example, leveraged loans, compression and risk spreads, are there areas you monitor, particularly that you're particularly focused on as an indicator of whether there's a sign of trouble?


BOSTIC: So you mentioned leverage, and what we've seen over a series of episodes is, leverage is a source of a potential source of risk. So we need to understand that I would also emphasize activities in non-bank sectors. Those are the types of financial sectors that we actually have less clear sightlines into. And so it requires us to have extra work and extra effort to try to understand exactly what's going on there. So those are two areas that I do worry about, and I do try to get as much information as possible because I think if we're gonna see worrying froth, it's going to happen there first before we see it in the banking sector more directly.


HUBBARD: Okay, I think we have time for one last question if it is a quick one, operator.


STAFF: Question from Peter Hooper. Mr. Hooper, you may go ahead. Since we're having some technical difficulties, we'll move on to take our next question. Apologies. That is the last question in the queue back over to you, Dr. Hubbard.


HUBBARD: Well, thanks so much, assuming Peter isn't now unmuted, if not, I want to thank President Bostic for being with us today. While the Fed may not be ready to take the punchbowl away, I'm afraid I'm going to have to from this particular session at any rate, and I would recommend everybody with President Bostic referred to and I did as well as a number of great trackers and features are right on the Atlanta Fed website. So I'll give that as a short commercial. So, thanks to all members attending this virtual meeting. And of course, thank you, President Bostic for your remarks.


BOSTIC: It's been a pleasure, thank you.


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