Fed has luxury to wait on rates while labor market remains solid, Atlanta Fed's Bostic says

[Federal Reserve Bank of Atlanta Georgia tower entrance]

If tariffs result in a short-term price shift, then the Federal Reserve shouldn't respond to tariffs, Atlanta Fed President Raphael Bostic said on Wednesday.

"The question we have to ask is: How close is this to the text-book example," he said in a moderated conversation at an event in Red Bay, Alabama. One difference is that tariff policy is shifting over time, making it difficult to settle on how that will affect the economy.

Another difference is that these tariffs are intended to change supply chains, Bostic said. If that happens, "then there's no reason you would expect the post-tariff economy to be like the pre-tariff economy," he said.

Regarding monetary policy, "my pre-disposition is to try not to bounce around," he said. For now, the central bank can hold rates until it has a better sense of how the effects of tariffs unfold. "I feel we have the luxury to do that because the labor market is pretty much at full employment," he said, pointing out that a 4.2% unemployment rate still indicates a "remarkably strong" labor market.

The Fed's task now is to figure out how much have labor markets weakened, he said. [https://www.youtube.com/live/ubZ7AK1ga2Y]

For the economy overall, Bostic said he's seeing weakness in the economy in the low- to moderate income segment of the population. "Stress is migrating up the income distribution," he observed. Currently, upper income consumers are still okay, he added.

On the business side, the one area of weakness is discretionary purchases.

"Sectors matter on the business side," he said. Businesses affected by tariffs are setting up a range of strategies. Also, surveys are showing that small businesses are experiencing stress much more than larger ones.

When asked about the potential for a federally backed digital currency, laws would need to be written to allow that, he said. There are still a lot of issues that would need to be resolved, including privacy concerns. There's a lot of debate over the potential use cases, he added.

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