Turns out central bankers aren't all about monetary policy. I've actually been a model for a skateboard company. The president of the Atlanta Fed on the program today, embarrassing stories and all. From American Public Media, this is Marketplace. From the studios of Georgia Public Broadcasting, today I'm Kyle Rizdahl. It is Tuesday, the 24th day of February. Good as always. Have you along, everybody. All right, so to be fair to Rafael Bostic, the skateboarding modeling gig was when he was a kid. But that is, in fact, how our interview started at an event this morning here in Atlanta. After nine years, Saturday is Bostic's last day on the job, running one of the 12 regional Federal Reserve banks and on a rotating basis, voting on interest rate policy. So we started with him not getting to do that anymore. The first thing I want to ask you is not that you're done, done, but what was it like leaving your last FOMC meeting, knowing that you were on your way out? Yeah, you don't know this. So the last FOMC meeting I took virtually, it was in January and that was a time when they had the ice storm and I had three flights cancelled trying to get up there and so I figured three strikes are out and I was just so I dialed in so it was kind of surreal to have the last few statements be from a distance and not be able to see people in the room but it's funny when you know it's the last time you're going to say things, you're going to make a different kind of statement. And what I really wanted people, my colleagues, to know is what I appreciated about what Atlanta allowed me to bring to the table and how we have a distinctive voice because of what we do and that more people needed to lean in on that and be that way. And then I just said, I'm going to be cheering for you as we move forward. And know that from everything I've heard, Americans trust the Fed and believe in it and think it's a really important institution and need everyone to remember our mandates, remember our mission, and just be true to it always. So let's talk about right now. this is, and you've said a version of this, as uncertain a time, as tough a time for monetary policy and central bankers as there has been in a very long while. First of all, why do you believe that? Why do you say that? Well, I'll say it like this. When I go and talk in public settings, a question I often get is, what are the three things that are keeping you up at night? and uh three things only three i mean i'm a regular guy and i got like a dozen yeah i try i try to i try to be zen right just you gotta you gotta push some things out um and in 2020 a global pandemic wasn't on my list in 2021 or 2022 a war in europe wasn't on my list i've been talking with my team a lot about how much you should weight what historical economic models predict versus what we're hearing from people in the street. And in environments where the unexpected and the unusual is happening, those models become less effective. And so then it's much more art that you have to do, and it's much harder in that way. I think you see that in terms of sort of how the committee has been over the last six to eight months in terms of dissents on both sides. I think part of it is because there's so much uncertainty about what's actually going to happen, that people can have very different narratives about what they think is most likely. Do those dissents bother you, the idea that people are going to not go along with the majority of the committee? No. I actually think that's a sign of a healthy committee. I've been in a number of meetings where the data were pretty clear. And so the idea that you'd have five different views was really unlikely. And so in those situations, not having any dissents was fine because I thought that things are pretty obvious. Today, very little is obvious. And so the dissents, I think, are a byproduct of that as opposed to a sign of dysfunction. So let's talk about for a second what you're looking at right now in this economy. And you're not allowed to say labor market or inflation. Go. So that's your revenge? That's it. My job is to ask hard questions, sir. Friends for the second question. I'm trying to understand how much of the turbulence that we're seeing is likely to be episodic versus how much is it going to be structural. You take AI and technology. there are lots of reports you all have done a number of these as well to suggest that these new technologies are going to change the way that businesses think about how many people they need to produce the goods that they want to produce that could be a structural change if that winds up being true and it winds up penetrating through the entire economy then all of our benchmarks are going to have to change like how we think about what a good jobs number is or what unemployment rate that's reasonable should be, because the same number is sending a very different signal. And then there are some things that could be episodic, but they also could be structural. So you think about the tariffs. President Trump in his first term introduced tariffs. President Biden kept them. And now we doubled down in Trump too Is it episodic Are we will we at some point return back Or is this our new reality that all businesses are going to have to adapt or adjust to for the next 10 15 20 years Let me go sideways here for just a second. Since you mentioned the president and tariffs, I truly do not want to get political about this, but how did, because you're almost gone, how does it make you feel when you're, sorry, not gone, gone, are we clear on that one? He's still a young man, which we'll get to in a little while. How does it make you feel when your job is through data-informed decision-making and public communications to try to control as best you can the fate of this economy, and really kind of now the last year it hasn't been in your control? So I actually don't think it's ever 100% in our control. Yeah, no, granted, granted, right? What I would say is we're trying to control what we can control. And in order to do that, we need to understand how decision makers are operating in whatever environment that we have. Look, at the beginning of 2025, most businesses that we were talking to said, we know there's going to be some tariffs that are going to be put onto the economy. Then April comes, and what everyone discovered was what they thought the level was going to be was maybe 20% of what it turned out to be. And what's been interesting is that businesses and families as well have been quite creative to try to mute the impacts as much as they can. So it's meant that the influence on tariffs through the economy has been stretched out over a much longer period of time because everyone's trying to delay, postpone, parry, and they've been successful. But that doesn't come without stress, right? Small businesses are stressed. Consumers are stressed. You know this. You go out and talk to as many people as I do. Oh, I'm stressed too. We're all stressed. So yeah, so okay, a couple things. So one, uncertainty by itself makes people nervous. Second, big changes lead to real questions about viability of business models. So now businesses have to figure out, do I have a business model that's going to work? and small businesses don't have as much buffer to really be able to weather it. So it becomes much more existential for those sort of institutions. We've seen it with families as well. So affluent families have been able to really just roll through and flow, and others at the lower end of the income distribution are making substitutions to try to manage it as you go along. Look, you know that consumer sentiment is very low. It's terrible. Particularly when you look at the aggregate economy output, and it's above potential. People should be happy in this environment, but they're not. And it's the stress that I think is overlaying a lot of that. How do you reconcile, though, just consumers being really cranky and yet still spending? Like a lot. because there isn't one just generic consumer. I think you have some consumers who are spending a lot, a lot, and then you have other consumers who are trying to spend as little as possible. And because our economy is skewed to where much of GDP and aggregate output is driven by spending by the upper percentiles, you get to a number that is higher than you might otherwise think. is one of the reasons, another one of the reasons, why this is a really difficult time to be a central banker. Sorry. How much of a factor, though, is that K-shaped economy in your thinking? And also, you don't speak for the committee, but you guys chit-chat over coffee from time to time, I'm sure. Yeah, I drink tea, so I'm not in those things. Beverage of choice. I don't know if the Fed has happy hours, but maybe that too. Yeah, those are Vegas times, so I'm not allowed to talk about those. So our tagline is an economy that works for everyone. And so we need to understand how every person, wherever they are, is experiencing the economy. And then how does that range of experiences influence where we think policy needs to go? Not for nothing, but you hear that all the time on this program, that headlines are all well and good. But what really matters in this economy is how people are feeling in their day to day. More from Rafael Bostic and the Atlanta Fed coming up in just a little bit. Hey, here's a question. With the Supreme Court having struck down some of President Trump's tariffs on Friday and him having rolled out new ones effective today, by the way, what is the state of play in the trading relationship between the world's two biggest economies? No idea? Here's Marketplace's Sabri Beneshaw to bring us all up to speed. There are still tariffs on stuff from China, but they have come down. The tariff rate on Chinese goods fell from a low 30s to about 21 percent on average. Oliver Melton is a director at Rhodium Group. So China's tariff rate now is only marginally higher than that applied to Turkey or Vietnam or Thailand or even India, which means that China is in a better position, comparatively speaking, to compete with those countries to sell into the United States. But the administration has been pretty clear about its intention to rebuild its tariff while using other legal authority. This is not a slam dunk win for China. Zong Yuan's Zoe Liu is a senior fellow at the Council on Foreign Relations. There are other tariff tools the administration can use. They're slower, have more red tape, they're limited in some ways but they are there It would be inaccurate to say that at leadership level Trump power is being significantly weakened On the other hand China still has a lot of leverage of its own Scott Kennedy is at the Center for Strategic and International Studies China already had gained traction in the relationship in 2025 when the Chinese turned the tables on the United States and effectively used rare earths as a weapon to get the Trump administration to back down some. So the U.S. still has plenty of ways to pick a new trade fight with China. The question remains, does it really want to? In New York, I'm Sabri Beneshour for Marketplace. Coming up. It's starting to kind of resemble a circle. If it goes on much longer, it will become a circle, but we're not quite a circle yet. We will circle back. But first, let's do the numbers. Dow Industrial is up 370 today, three-quarters of 1%, 49,174. The Nasdaq up 236. That is 1% finished to 22,863. S&P 552 points to the good, also about three-quarters of 1%, 68 and 90. The Home Depot outpaced the expectations in its earnings report today despite macroeconomic challenges. Tariffs, housing market, immigration crackdown. Repeat after me. Home Depot notched up 2% on the day. Bond prices, thanks for asking. They fell. Yield on the 10-year T note up 4.03%. You're listening to Marketplace. This is Marketplace. I'm Kai Rizdal. Part two now of Rafael Bostic, the soon-to-be former president of the Federal Reserve Bank of Atlanta. All right, to the nuts and bolts of this economy, and now you are allowed to use labor market or inflation. You notice I haven't said either of those words. I follow directions. You mentioned unemployment once. Where do you stand? Where's the balance of risks? Inflation. Thanks for coming on my TED Talk. so I would say it like this one the longer we're not at target the higher the likelihood that people will stop expecting that we will ever get to target and then they'll start making decisions as if inflation is not going to be 2% but it's going to be 3% and that will change the set of investments that make sense it'll change the amount of risk taking that you have to take in the marketplace it will put our economy in a tougher situation. So I worry about that. And then the second thing is that we've been talking about getting inflation to 2% for a long time, and we said, we'll do whatever it takes. If it looks like we stopped doing whatever it takes, then people might start worrying about our credibility. Like, do they have the stick-to-itiveness that we need them to have to have that longer-run potential? and that's a problem. So the inflation side has been a big concern for me for a long time and so that's that. Now you go to the labor market and there I think it's actually very complicated and it's complicated because I do think there are some structural changes happening that are making it difficult for me and anybody really to have a good sense of what the implications are where the economy is moving forward. So I think about AI and technology. Businesses are less eager to hire. Labor supply has contracted because we've counted so much on immigration and now the number of people coming to be available for workers is much lower. All those things mean that a single monthly job number today actually is sending a different signal than it sent a year ago. Sorry, explain that a little bit. Why? Sure, because there's a relationship between the number of workers, the amount of capital you have, and what that means for output. And if you want to think about the strength of the economy, if you want to think about the total productive potential of the economy, you need to understand how labor and capital come together to produce goods. Now, if the labor supply is down, then you don't have enough workers. You don't have just numbers of workers to produce. So that's going to bring down your productive capacity. If you have technology that counters that, then with that lower number of workers, you can actually get to higher outcomes and higher outputs. So then the low number of workers is not a signal of weakness. And so we need to be thinking about how all these things fit together. We have a labor market, I think, where there's a lot of uncertainty. And when I talk to businesses, they don't tell me that they're going to lay off a ton of people. They're worried about their workforce. But also they're not hiring a ton of people. Because of uncertainty. Right. Because they think there's technology that might be able to replace some of that stuff. So that not hiring is not a sign that they're weak. It's a sign that they might have other strategies that can work. So this is really interesting because I went back and I listened to the most recent interview that you and I did, which was a while ago. But you were, and I said this at the time, we've been talking for a long time. You've always been reasonably steady state. You were as downbeat, I think, as I had ever heard you. And it sounds like you're kind of still there. So I pushed back on that in that interview. Yeah, you did. Look, I think we are seeing a lot of turbulence. And it is hard to know for sure what it means for the long run trajectory of this economy. Okay, wait, let me try to put that into English, because people are going to hear a central banker say turbulence and long run, and they're thinking, oh my God! Over to you sir Calm down It be all right So look we have a lot of geopolitical stuff going on We have a lot of uncertainty around the tariffs and what it means. We have AI that is, you see headlines all the time about the potential for it to disrupt. you see all the things around immigration and the fear that is in many of these communities about can you go to work or can kids go to school there are a lot of things going on that's the turbulence that is the reality that i think everyone sees that that's that's pretty straightforward but what is not straightforward is the question of what you're going to do like in my lifetime we've not had this series of things all happening at the same time. So the models that we're going to use, I don't have confidence that are going to be super helpful in predicting where we're going to be moving forward. So I've got to talk to the people who are making the decisions that will determine where we are, how we're going to move forward, and then try to glean things out of that. That's a lot of work. I think, trying to think why you think I'm downbeat. I mean, I'm... Based on our past conversations, right? You always in our conversations have been, you know what, we're going to figure this out. The Fed's doing its job. The economy's resilient. And in the last year and a change, you're talking about uncertainty and how you're making decisions in a fog. And that coming from you hits as downbeat. All right. Not pejoratively. Oh, no, no, I understand. Okay. we're going to figure it out. Clean up on aisle six. The feds, look, but figuring out is going to take a little more time because there's more complication. Figuring out will mean that I think we're going to have to move more cautiously, but we're going to keep doing our job. And, you know, one thing I always say, I don't have a recession in my outlook. Like, that is not where I see this economy going. Still today now. Still today, right now, I do not. And to me, that's why I'm mystified a little on the downbeat, because this economy has been remarkably resilient. And when we talk to businesses today, they tell us the last quarter, the last second half of 2025 was pretty strong. They say, we're going to get exactly that as the baseline. right so none of the input or the feedback that we're getting it tells us that the economy is on the cusp of something terrible and on quite the contrary we're going to produce at a pretty robust level somehow an hour was not enough thank you all for your time ladies and gentlemen Dr. Basik thank you for stopping appreciate it not only was an hour not enough in the moment, the 17 minutes or whatever it was that we got into the program today weren't enough. Either one more short-ish installment from Rafael Bostic coming up tomorrow. There are definitely structural pieces of this economy that artificial intelligence is going to rearrange, as Dr. Bostic was just saying. There are also pieces of the artificial intelligence economy that just, well, hear me out on this one. Meta and the chipmaker AMD, Advanced Micro Devices, announced a deal today that could come in at more than $100 billion. Meta's going to buy millions of AI chips from the NVIDIA competitor, and depending on how things work out, in exchange, Meta could get a 10% stake in AMD. And if that kind of deal sounds familiar, it might be because it is nearly identical to the one that OpenAI made with AMD last year. Marketplace's Megan McCarty Carino explains why the AI economy does seem stuck on this kind of, shall we say, investment structure. Calling AMD a competitor to NVIDIA might be a bit of a stretch, says Tufts historian Chris Miller. The company commands less than 10 percent of the AI chip market. That's meant that the ecosystem around NVIDIA, not just the chips themselves, but also the software that surrounds them is much, much more developed than at AMD. So Miller says it makes sense for AMD to give up part of the company to attract a big money customer like Meta. And Meta gets more than equity in AMD, says analyst Gil Luria at DA Davidson. It also gets a diversified supply chain for the hardware that is the choke point in the AI boom. They have been beholden to NVIDIA, especially over the last three years, and that means that NVIDIA has all the pricing power. Offering equity to customers is just the latest in what's becoming a tangled web of deals in AI. But what can look like a virtuous cycle of investment can also tip into something more troubling. Circular financing, where the same dollars circulate between companies, says Jay Goldberg at Seaport Research. And right now? It's not circular, but it's kind of like a dodecahedron. A 12-sided die from Dungeons & Dragons? It's a shape that is starting to kind of resemble a circle. If it goes on much longer, it will become a circle, but we're not quite a circle yet. When companies start buying demand for their own products, then it's a circle. I'm Megan McCarty Carino for Marketplace. All right, we got to go. I did want to take a second to thank the good people here at Georgia Public Broadcasting for accommodating us on short notice today. We do appreciate it. Jordan Mangi, Zoniel Maharaj, Janet Wynn, Olga Oxman, and Virginia K. Smith are the digital team. I'm Kyle Rizdahl. We will see you tomorrow, everybody. This is APM.
