Could the Federal Reserve’s campaign to tamp down on inflation be nearing its end? On Thursday, the July consumer price index showed inflation falling to 2.9% year over year, the first time it had fallen below 3% since 2021. And while that still leaves it above the Fed’s 2% target, the trajectory could clear the way for Fed officials to cut rates when they next meet in September.

Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, is one of the officials who will vote on whether or not to cut rates, which have held at a 23-year high since July 2023. Bostic spoke with “Marketplace” host Kai Ryssdal about his outlook on the economy and where he thinks monetary policy might be headed.

Kai Ryssdal: So you get the CPI the other day. You get it a day early, right?

Raphael Bostic: I do not.

Ryssdal: Really?

Bostic: I get it with everybody else.

Ryssdal: All right, so, you get it yesterday morning, and you see 2.9%, and what’s the first thing you think?

Bostic: The first thing I think is inflation is getting back to target in an orderly way. And I have, geez, a lot more confidence that inflation’s sustainably on its way to 2%, which is a very good thing. The top-line numbers have been falling consistently. [Personal consumption expenditures price index] before the CPI had fallen nicely, and the CPI numbers the first time since March of 2021, that had been below 3%, so lots of progress, and that’s very positive.

Ryssdal: All right, so look, you said a couple of magic words in there. It’s proceeding orderly toward 2%, you have “more confidence.” The next question has to be: What’s taking you guys so long?

Bostic: Well, I think you have to remember our target’s 2%, not 2.9 or 3.2. There’s still a ways to go, and things can happen on that road. So, I think it’s in all of our interests to be cautious and vigilant to make sure that the next reading doesn’t take us in a different direction. So patience, I’ve been talking about patience for a long time. I think I’ve been on your show about a year ago, was saying that we’re going to have to wait this out and just be patient, because if we rush, go too soon and then have to raise rates again, that will be, you know, my directors and my board members tell me that’s the nightmare scenario. So I want to make sure that we avoid that.

Ryssdal: Understood. But a year ago, unemployment was, I don’t have the number right in front of me, but certainly less than 4%. Now it’s ticking up. It’s 4.3%, and the labor market is starting to look a little meh. How much does that change your calculation?

Bostic: Well, it’s definitely a factor. You know, when I talk about the labor market, the phrase I use is “weakening, but not weak.” By historical standards, the unemployment rate of even the 4.3% is pretty low. Now what you said is true. It’s come off of a 3.4% level, so that’s a lot of weakening. But when I talk to businesses, and what they tell me is, although they’re not looking to hire a lot of workers, they’re actually not in layoff mode either. Their outlooks or that demand is going to stay strong, and that the workforce they have today is going to be one that will sustain. So it’s still tight out there. I mean, I try to remind people, right before the pandemic happened, everyone was saying labor markets are tight, and how can we continue to have a strong economy if we can’t find workers? We’re kind of in that space again.

Ryssdal: Is it fair for those of us who keep a close eye on the Fed to intuit that you all are starting to, I mean, it’s not that you haven’t been paying attention to the labor market, but inflation has been taking up virtually all of your brain space. Do you now have more brain space for the labor market as it weakens, but is not weak, as you say.

Bostic: I definitely do. You know, the thing that I’m most concerned about at this point is that we have dual mandate, and both of them need to get to their target. Inflation is moving in the right direction. Employment might be moving in the wrong direction. And so the thing I’m most concerned about is that this weakening that we’ve seen accelerates in such a way that jobs stop being produced, and then that might lead to more disruption and pain in the labor force. What I would say right now, though, is I’m pretty pleased that that’s not what we’re seeing now, and that’s the important thing. Consumers, by and large, are continuing to spend. And so the demand for product is good, and firms and businesses feel like they got to keep their workers, because they’ve got some demand to meet.

Ryssdal: You know, we had you on in the earlier days of the pandemic, when “transitory” was the was the word of the day. And you very famously, as you said on this program and elsewhere, you’d had a little swear jar at the Atlanta Fed, every time somebody said “transitory,” they had to put a buck, or whatever it was, in the swear jar. And we’re past that discussion. Here’s my question, though, the consuming public sees inflation coming down at a very nice clip, much closer to where the Fed wants it to be. The catch, of course, is that price levels remain elevated. How do you make people understand that even though inflation is down, price levels are likely to remain high?

Bostic: Well, I say it just the way you said. Price levels are not likely to come back down. But the most important thing in all of this is that wages are growing faster than inflation, so families’ pricing power, purchasing power is increasing with every month, and over time, the prices won’t feel like so much of a sticker shock relative to the amount of money people will have in their pocketbooks. So that’s the part that I think is really important. It’s just going to take some time for that wage dynamic to play out, and once that does, I think people will start to, like, level into a new equilibrium.

Ryssdal: I’m going to commit the journalistic sin here of asking you a question that I know you’re going to dodge, but I kind of have to anyway. The Fed is going to become more political as the election season goes on, and I know you will say, as Fed Chair Powell has said, as all of you all say, we don’t let it interfere with our decision-making. Here’s my question: When you’re in the room, and we’ll say that you’re a voting member of the Federal Open Market Committee this year, do you all talk about not talking about the politics of this whole thing? 

Bostic: I don’t, because I’m not going to talk about it. So, there isn’t a reminder that needs to be made. No, it’s really interesting. If you look back over the history of the Fed, even in the last 20 years, the Fed has done actions in election years … close to the election date itself. And so for me, I think that’s a reminder to me that we have a history of doing the right thing at the right time, or the thing that we think is right at the right time, and I’ve got an obligation to abide by that and to continue that tradition moving forward.

Ryssdal: Last thing, sir, and then I’ll let you go. September, live meeting or not a live meeting?

Bostic: Every meeting is a live meeting. I’m hopeful that the numbers are going to come in quite positive, and we’ll have an interesting conversation about whether we should be moving off of our policy stance. And then we’ll just see sort of where that goes.

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