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Fed Says Rise In Inflation Is Pandemic Related And Should Ease Over Time

NOEL KING, HOST:

The price of consumer goods is rising. In May, prices broadly were up 5% from May of last year. That's the biggest year-over-year rise since 2008. How worried should Americans be? Federal Reserve Chair Jerome Powell says inflation is likely a short-term phenomenon that's linked to the recovery from the pandemic.

With us now is Raphael Bostic, president of the Atlanta Federal Reserve. Good morning to you, sir.

RAPHAEL BOSTIC: Good morning, Noel. How are you?

KING: Good. Thank you. Do you share Jerome Powell's view that this inflation is a short-term phenomenon and that there is an end in sight?

BOSTIC: So, yes, I do share the chair's view. I mean, if you look at the numbers, the elevation in inflation is really driven by a couple of factors. Some of them are really tied to the reopening. So airfares and car rentals are up because there are so many families that are out just - they want to get out of the house and move around.

And then there are also other spikes that are associated with supply chain constraints. You know, you heard about the semiconductor shortages. That's triggered a shortage in the creation of cars. And so new cars and used cars prices are up. In both cases, we expect those to really go away over time.

Now the one thing you said, which is something that we are looking at, is that when I talk to businesses, they are saying that it's going to be temporary, but temporary is going to be a little longer than we had expected initially. So rather than it being a two- to three-month, it may be a six- to nine-month factor. And this is something that we're going to have to pay attention to see if that changes how people approach the economy.

KING: And if it is six to nine months, as opposed to two to three months, is there something specific that the Fed should be doing?

BOSTIC: Well, I think there are a couple of things that we would do. First of all, we'd monitor very closely what's happening with expectations. That is the key to determining whether there are some real structural changes in how the economy is playing out. And then the second is really to dive deeper into this to see if there are things that policymakers might be able to do to break the - those dynamics and leave the crisis to return to normal. So we would do both those things. You know, I talk to policymakers all the time and tell them the things that I see that are sources of concern.

KING: You make the good point that there are particular areas of the economy that are driving inflation. So we hear a lot about car rentals. We've also recently heard a lot about lumber. Are you worried? Are we seeing the rise - a rise in prices of basics, things that families need, like bread and milk and diapers?

BOSTIC: Well, there has been some movement in that space. It hasn't been as dramatic. And it hasn't really - those have not been the goods where we've seen the prices really determine the overall inflation rate. So I'm watching that. Right now, that's not front and center in sort of driving the numbers and the concerns that I'm hearing across the marketplace.

KING: OK. According to a survey by the University of Michigan, consumer sentiment actually rose in early June, which is a good sign. But it is middle- and upper-income households that say they are feeling confident about the economy. It is lower-income families who are going to feel a pinch on higher prices, especially if things like food become issues - food and clothing. You said those are not top of mind right now. But let's say prices on those basic things do rise. What should, what can the Fed be doing to get lower-income families feeling better about the direction in which we're headed?

BOSTIC: Well, let me say two things. First, we've seen through the pandemic a very uneven effect of the virus. And lower-income people have been hit much harder. So they're feeling precariousness much more intensely than any other households, really. And that's a real thing. For me, I think there are two things that the Fed should be doing, and I think we're doing both of those.

First, we are working hard to make sure our policies are promoting as much job creation as possible because the best thing that we can do is get people into jobs that are paying wages that move them away from that precariousness. That's important.

And the second thing that I do a lot is talk to policymakers and say, look; even though we're making progress, don't forget that there are many who are still really on the edge and very concerned. And we have to make sure our policies don't pivot in ways that make it look like we're declaring victory prematurely. We're still 7.5 million jobs short of where we were pre-pandemic, and that is a benchmark that I think we all need to keep our eye on.

KING: And I would imagine you would agree that when we talk about job creation, we also want to talk about jobs that pay well - right? - because what we see now are some people who don't want to go back into the job market because they have decided that they are not going to work for poverty wages. We know that that is a big trend in the economy, or at the very least a trend in the economy. So I guess my larger question is here, is there any way to make sure that the right types of jobs are being created, the kind of jobs that people want to take because they allow them to feed their families without relying on assistance?

BOSTIC: Well, I think your line of argument is exactly on point. And at our bank, we've been talking about this and trying to do things on this for a long time. The reality is there are lots of jobs that are available right now that pay those sorts of wages, and for information reasons and other reasons, people are not aware of them. And so we're doing all we can. We have a tool on our website called the Opportunity Occupations Monitor, which lists, at our county level, the jobs that pay the high-quality living wages that you referred to that are vacant and don't require you to do years and years of training. So for me, I think that one of our objectives is to try to facilitate that. You know, we have a Center for Workforce and Economic Opportunity. And we are trying to create infrastructure and facilitate that at the local level so that every American gets work that allows them to live in a comfortable way and not worried about whether they can eat or where they're going to live.

KING: A last brief question, if you'll forgive me - there appears to be informed chatter that if Joe Biden decides to replace Jerome Powell when Powell's term ends, you would be next in line. Are you interested in being Fed chair?

BOSTIC: You know, I haven't really thought about that. You know, we're just coming out of a pandemic. And I've got a lot of needs in my district, in my business, my bank here. And that's really what I've been focused on.

KING: Fair enough. President of the Atlanta Federal Reserve Bank, Raphael Bostic. Thanks for your time, sir.

BOSTIC: Thank you. Good to talk. Transcript provided by NPR, Copyright NPR.