Raphael Bostic paints fairly rosy economic picture at Atlanta Rotary

In his annual talk to the Rotary Club of Atlanta, Federal Reserve of Atlanta President Raphael Bostic compared the economic situation to last year’s forecast.

“I was reflecting on last year when we were here – the whole message I wanted to impart was that inflation was too high,” said Bostic, remembering inflation was hovering at 7 percent at the beginning of 2023. “Fast forward a year. Inflation has come down quite a bit – more than I expected. It’s come down a lot.”

Inflation is at 3 percent, still short of the Federal Reserve’s goal of 2 percent. But much better than where the economy was a year ago. Inflation peaked at 9.1 percent in. June 2022.

“I’ve had to adjust my projection,” Bostic admitted. “My projection was that the GDP (Gross Domestic Product) growth rate would be 1 percent. It’s at 2.5 percent. That’s a big jump.”

The jobs picture also is doing well – with unemployment not rising significantly with the drop of inflation.

“A year ago, unemployment was 3.4 percent. Today it’s at 3.8 percent,” said Bostic, who has been president of the Atlanta Fed since 2017. “That’s not what you would expect to see with inflation coming down. When I took this job, the unemployment projection was 4.2 percent with 2 percent inflation or less. We are in a very solid position right now.”

Raphael Bostic in a conference room at the Atlanta Federal Reserve Bank shortly after becoming president in 2017 (Photo by Maria Saporta)

Bostic, who has been president of the Atlanta Fed since 2017, was interviewed by his predecessor – Dennis Lockhart. The two of them have become an annual economic comedy show – quite a departure from the standard economic forecast.

Lockhart asked Bostic if he would describe the situation as inflation, deflation or disinflation.

“This is disinflation,” Bostic said. “The amount (of inflation) is less than it was the year before. We were at 7 percent. Now we are at 3 percent. Today we have disinflation. That’s desirable.” 

Bostic added that it’s reassuring that income has been rising faster than inflation. “We should expect that to continue,” he said.

Lockhart then asked Bostic his thoughts about the Federal Reserve cutting interest rates. The Fed’s governors have said they expect between two to four rate cuts (25 basis points each) in 2024.

Bostic said he was in favor of two cuts this year – likely third and fourth quarter.

“My thinking has changed,” Bostic said. “I had us at only one rate decrease this year. Now I’m looking at two.”

Still, Bostic said his inclination is to be more conservative.

“I have got a natural bias to be tighter. I’m comfortable with that,” Bostic said. “I just want to see the economy continue to evolve. My projection at the end of this year is 2.5 percent, still not 2 percent. Some slowdown will be required.”

Still, Bostic said the economy is headed in the right direction.

“We are on a path to 2 percent. We are at 3 percent today,” Bostic said. “The goal is to make sure we stay on that path.”

Lockhart asked Bostic about the strong employment report for December when the economy added 216,000 non-farm employment.

Bostic said two sectors accounted for two-thirds of that job growth – health care and government services. The jobs report showed Bostic that “our policies are working.”

“You are describing a pretty favorable picture,” Lockhart told Bostic.

Of course, like most economists, Bostic hedged a bit. 

“A ton of uncertainty exists today. That’s why I don’t want to move too fast,” said Bostic, mentioning geopolitical and climate issues.

Neither Bostic nor Lockhart mentioned that 2024 also is a presidential election year, which adds to economic uncertainties.

Milton Little, president of the United Way of Greater Atlanta, commented that about 40 percent of Georgia’s labor market doesn’t earn enough to pay for their living expenses.

“We need to make sure our economy works for everyone,” Bostic said, adding that will only strengthen the economy. “We have a host of things we are doing to try to facilitate that everyone has access to opportunity… Getting inflation to 2 percent is essential to all of this.”

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