Atlanta Fed President Raphael Bostic on the emerging risks

Atlanta Fed President Raphael Bostic on the emerging risks
Image source: CNBC Video Screenshot

The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Atlanta Fed President Raphael Bostic and CNBC’s Steve Liesman on CNBC’s “Squawk Box” (M-F 6AM – 9AM.) The following is a link to video of the interview on

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Watch CNBC’s full interview with Atlanta Fed President Raphael Bostic

BECKY QUICK: Last hour we were joined by St. Louis Fed President Jim Bullard, who spoke about the strength of the U.S. economy.

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JAMES BULLARD: I’ve been arguing that we’re in good shape for a soft landing in the U.S. economy. Tracking estimates of GDP in the first quarter, hanging right around 2%, 2.25%, something like that. So, at least as far as the assessment we can make as of today, we’re not going to see a major impact on the U.S.

BECKY QUICK: To continue the conversation about the Fed, we are joined on-set by Steve Liesman and a special guest. Steve, welcome back.

STEVE LIESMAN: Thanks, Becky. We are pleased to be joined by the Atlanta Fed President Raphael Bostic. President Bostic, thanks for joining us.


STEVE LIESMAN: Let’s start right in with the issue of the day, which is can you tell us how you’re thinking about the potential effects of the Coronavirus on the U.S. economy?

RAPHAEL BOSTIC: Well, the Coronavirus, you know, one of the issues that we have is that new information comes in all the time. And so, we know it’s going to be disruptive to China, to production, to a lot of the supply chain. When I talk to businesses here, what they tell me is that it’s going to be a short-run disruption, if you have that kind of exposure. But they’re not expecting they’re going to lay off folks. They’re not expecting there will be an extended negative impact. So, I think this is going to be a short-time hit, we’ll get the economy back to its usual level that Jim was talking about, 2 to 2.25%, sometime into the future.

STEVE LIESMAN: So, does that mean you’re looking at some points coming off of GDP in the first quarter, but getting most of that back in the second quarter?

RAPHAEL BOSTIC: That’s what my models are saying right now. But, of course, we get new information about Coronavirus pretty much every day. And so, while we have that as our baseline, we’re always open and monitoring to make sure that there aren’t new things that are coming up that have some deeper implications for the economy.

STEVE LIESMAN: I’m not quite sure how to ask this, but when you think – when you fold that scenario, the Coronavirus, what’s your general outlook for the U.S. economy?

RAPHAEL BOSTIC: So, that’s sort of an unclear question. So, let me say, my general outlook for the economy is pretty good. We’re going to be at 2%, 2.25%. Employment is going to continue to be strong. Inflation is not going to be a significant problem. And When I look around and talk to business leaders and folks and consumers, the one thing I hear is, you know, we’re not taking extra risks, we’re not seeing anything that would lead to significant changes in course. And, as long as that’s going on, I think the economy can just roll along as it has been.

STEVE LIESMAN: And is policy then right, or to use the term of art you guys have been using, appropriate for that scenario, where it is right now?

RAPHAEL BOSTIC: Yeah, I have no impulses really to think that we need to do anything with our policy stance different than what we are today.

STEVE LIESMAN: So then, how do you fold into that the idea that the market has priced in the probability of a rate cut?

RAPHAEL BOSTIC: So, that’s into the future, right? And, you know, there are many different scenarios about what’s going to happen between now and say, June or July. My baseline expectations are that the economy are not going to see risks and we’re going to stay stable, so we won’t have to do anything. But, you know, my focus is really on today, and what we know today, what we know next week as the data comes in. If we see more weakness than expected, then I would be open to moving. But that’s not my expectation.

STEVE LIESMAN: What’s not in the future, President Bostic, is where bond markets are right now. You are toying with all-time lows on things like the 30-year and 10-year. What signal is that sending you?

RAPHAEL BOSTIC: So, it’s sending me a couple of signals. So, one, we know that just there’s a global impact -- the global rates are low. Right? So, our neutral rate of interest is much lower than it has been historically. And that’s pulling everything down. I think there’s also issues around safety. So, the United States is a place where capital is flowing. And that’s actually pulling down yields as well. The other thing that I see when I look for -- when I look at these yield curve shapes, is really trying to find risk.

I talk to our finance guys at the bank and they say the yield curve has got the shape that it has. And I say, ‘So, where is the risk, where is the switch that’s going to happen such that the economy is going to turn in a different way?’ And when I ask that question, I’m not getting a lot of clarity. So, we’re going to continue to ask and continue to look. Because ultimately, we’re going to have a change in the economic performance from decisions that happen by people in the c-suites all across the country.

STEVE LIESMAN: It’s well to point out that the Atlanta Fed is not a small-time regulator when it comes to banks. There’s a lot of banks that are located there, right? Aren’t you guys on the front lines of supervisory, when it comes to--

RAPHAEL BOSTIC: We have a lot of banks. You know, our district has -- we have a couple of large banks, so we have Regions Bank. We used to have SunTrust, which moved into the North Carolina district – or the Richmond district, because of Truist. But we have a ton of community banks. And so, in a lot of the towns across the Southeast, there will be that baseline family-owned long-standing financial institution that plays a critical role. So, we talk to a lot of bankers and they’re also not taking on excessive risk. And so, things are pretty solid. And I’m pretty comfortable about where we are.

STEVE LIESMAN: What about the liquidity that’s been injected by the Federal Reserve into the equity market, sorry –into the banking system. I jumped the gun on that. Has it had an effect, do you think, in pumping up the stock market?

RAPHAEL BOSTIC: I don’t think so. Now, we’ve had a fair number of conversations about this on our team. And, you know, one thing that we see is that there has been this correlation. But correlation doesn’t always equal causation. And there are a lot of other things that are happening as well. And so, when we think about trying to identify this explicitly, the real question is: can you tease out all of the other stuff to make it clear that it’s exclusively on our policy? There may be a little, but I don’t think it’s the main driver.

BECKY QUICK: If it’s not the liquidity that was injected, I mean, Jim Bullard made the point that if you’re really looking to blame the Fed, look at the three rate cuts from last year driving rates down across the board. Is that something that pushed a lot of money towards equities because there’s no alternative or there’s no yield anywhere?

RAPHAEL BOSTIC: So, that’s possible. Again, there’s a lot of things that are going on to drive this. If you look at what’s happening in the equity market, there’s a lot of index investing that’s happening, there’s a lot of movement in terms of the technology companies. So, there is some justification for it. But it is – you know, I acknowledge that –

JOE KERNEN: Maybe you’re doing what you’re supposed to be doing, that is managing the economy in an effective way for growth, so you averted some type of -- maybe it was too tight, maybe there was going to be a bump in the road, you averted that. Business stayed strong, companies continued hiring. So, it was the Fed. It’s not just the liquidity, but you’re managing the economy in an effective way.

RAPHAEL BOSTIC: So, there may be some of that. You know, one thing I would say is, given where policy stands right now, we’re very close to what we call the effect of lower boundary zero. So, when you have that kind of limited space, I think there is some advantage to being a bit more stimulative than you might be otherwise. So, what you’re saying I actually don’t have that much of a problem with. But I think it really is around –

JOE KERNEN: I’m trying to tell you that you guys are -- helping and controlling -- I’m giving you more credit than I like to give the Fed. Because I wish it was the underlying economy. But at least you’re out of the way.

RAPHAEL BOSTIC: So, I do think it’s the underlying economy, but I think it’s because we’re out of the way. Right. So, one of the things that I’ve always thought kind of where we stand right now is that the economy is strong. It can stand on its own feet and it can grow pretty consistently. And so, we should let it do that.

BECKY QUICK: You raise the point about how there is a lot more indexing that’s taking place, investors putting their money into broad indexes. Does that raise a concern for you? I mean, you’ve noted that it’s happening. Does it matter?

RAPHAEL BOSTIC: I’m not concerned about these things right now. I mean, one of the things that is really important is just to understand the patterns. And so, we’re doing that. And then once you understand the patterns, the next thing is to really have our team think what are the implications for this, does this really affect how we should think about what’s going to happen to the economy?

BECKY QUICK: Have you found any answers to that? Because I mean, it’s an interesting point. We’re going to be sitting down with Warren Buffett on Monday and he’s been a huge advocate of investors just putting their money into the indexes. But are there unexpected or unintended consequences that could come from that?

RAPHAEL BOSTIC: It’s potential. So, I’ve read a couple of articles that talk about the concentration of a small number of companies that run these index funds, and that that could lead to some more coordinated strategies into the marketplace. But right now, we don’t see that. So, it’s certainly something you’ve got to keep an eye on, but right now I’m not seeing anything that would suggest that.

STEVE LIESMAN: I think that’s all the time that we have, and that we should thank President Bostic for joining us. And make it not the last time.

FED PRESIDENT RAPHAEL BOSTIC: I look forward to coming back. Thank you for having me.


BECKY QUICK: Thank you. And thank you, Steve.

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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