Eric Rosengren Talks Fed
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Eric Rosengren joins us right now, former Federal Reserve president of Boston. And Eric, I do want to start off with the general idea of what the Fed can do next, given the economic data that we've seen that seems to suggest a labor market influx, but still stable and inflation. Well, still a question mark, but not necessarily hot as it was just a year or so ago. Yeah, so I agree with you that the conditions for easing right now are not nearly as strong as they might have been a quarter ago. The CPI at 2.7% is substantially above the 2% inflation target. It was 2.7 last month as well. And if you look at the PCE measure of inflation, it's been gradually rising. So the result is that the inflation news has not been such that you can have
a great deal of confidence that the Fed's going to get back to target, particularly as you know, they've missed their 2% target for almost five years. On the labor market side, there were only 50,000 jobs created, but that's the average that we've seen over the last year. And part of that is because of immigration. With much less immigration, we don't have as much growth in the labor force. In fact, labor force has been pretty much flat. And so 50,000 jobs isn't that far out of the ordinary, given the slow growth in the labor force. The unemployment rate's at 4.4%. That's very close to what the Fed thinks it will be in the long run. It's a little bit above, but only a little bit above. So I think that the Fed is well situated to wait and see and see if the economy picks up.
There is reason to believe that next year GDP will be stronger. Fiscal policy is going to be stimulative because we're running large deficits. The big beautiful bill included investment credits that encourage investment and also has lower taxes for helping consumers out. So I think the conditions for reasonable growth next year are there. And so as long as that actually pans out, there's really no reason for the Fed to change the level of rates. There has been sort of a parlor game going on right now in financial markets, the idea that one way or another, we are going to see more accommodative policy out of the Fed this year, largely because of the political of factors here, whether it is the formal replacement of Jay Powell at his expected departure date later this year in May, or maybe potentially sooner than that.
But just overall, the idea that you have a White House that seems emboldened in its desire to continue jawboning where it thinks monetary policy should go. Eric, I know I heard from all these former Fed members that say, look, you go into that room, you focus on the data, not the politics going on down the street out of the White House.
What insights does Eric Rosengren provide about the Federal Reserve's current challenges?
This just feels a little bit different. here in 2026, though. Well, I agree with the commentators that have said that the Fed tends to focus on the data. But it does matter who's in positions to make the decisions. And so Jay Powell's term ends in May. And assuming that the administration comes up with someone to replace Jay and that person gets Senate confirmation, the administration's made clear that they're not going to appoint somebody who doesn't believe that interest rates should drop quite significantly, which has been clearly expressed by the president. So I think most of the optimism for interest rates coming down assumes that it's going to happen in the second half of the year when there's a new Fed chair in place.
It's still a committee decision.
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