"We're trying to control what we can control": A Fed president reflects

What It Covers

Outgoing Atlanta Fed President Rafael Bostic reflects on nine years leading one of 12 regional Federal Reserve Banks, addressing simultaneous economic disruptions — tariffs, AI-driven labor shifts, immigration contraction, and geopolitical instability — that render traditional monetary policy models unreliable and force decision-making through direct business and consumer outreach.

Key Questions Answered

• •Model Reliability in Crisis: When multiple unexpected shocks occur simultaneously — pandemic, European war, sweeping tariffs — historical economic models lose predictive accuracy. Bostic advises shifting from model-dependent forecasting to direct engagement with business decision-makers and consumers to understand real-time behavior, treating monetary policy as art rather than formula during high-uncertainty periods.
• •Tariff Magnitude Miscalculation: Businesses entering 2025 anticipated tariff levels roughly 20% of what April's announcements actually delivered. The gap forced companies and households to delay, postpone, and creatively reroute supply chains, stretching tariff impacts across a longer timeline — but generating significant stress, particularly for small businesses with limited financial buffers to absorb structural cost shocks.
• •K-Shaped Consumer Spending: Aggregate consumer spending remains elevated not because all consumers are healthy, but because upper-income households — who drive a disproportionate share of GDP — continue spending freely. Lower-income households are actively substituting cheaper alternatives. Policymakers and analysts should disaggregate spending data by income percentile rather than relying on headline consumption figures for economic assessment.
• •Labor Market Signal Distortion: A single monthly jobs number now carries a different meaning than one year ago. Reduced immigration has contracted labor supply while AI adoption reduces hiring demand. Bostic recommends analyzing labor data alongside capital investment and technology adoption trends simultaneously, since lower hiring figures may reflect strategic workforce optimization rather than economic weakness or recessionary pressure.
• •Inflation Credibility Risk: Every month the Fed remains above its 2% inflation target increases the probability that businesses and households recalibrate long-term expectations to 3%, permanently altering investment risk calculations. Bostic frames maintaining credible commitment to the 2% target as the Fed's most consequential near-term priority, warning that perceived loss of resolve compounds the underlying inflation problem itself.