Chapter 1: What is the main topic discussed in this episode?
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On the program today, sticky inflation. We'll do some video gaming and we'll talk about living on a cruise ship from American public media. This is Marketplace. In Los Angeles, I'm Kai Risdahl. It is Wednesday today. This one is the 25th of February. Good as always to have you along, everybody.
We're going to begin today with a one-two punch of sorts coming out of our interview with Rafael Bostic, the soon-to-be former president of the Federal Reserve Bank of Atlanta.
In the parts of that interview that we played yesterday – and we're going to play some more in a minute, by the way – but we talked a bit, he and I did, about the central bank's credibility, how and why people might start doubting the Fed's ability to do its job. In this instance, specifically, being able to get inflation back to where the central bank wants it to be –
Two percent, as you know, after not having been able to do it for years now, as you also know. He worries about that, Bostick said. So Marketplace's Brie Benishore gets us going with this. Have we been away from ideal inflation for so very long now? That we're stuck here? You know, in Star Wars, the Empire Strikes Back, Luke is trying to raise a spaceship out of a swamp. I can't.
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Chapter 2: How does consumer perception influence inflation expectations?
It's too big. And then Yoda uses the Force and actually does it. I don't believe it. That is why you fail. This is a common trope in movies. The idea that believing in something or not believing in something makes that something happen or not happen. Inflation is like that. You can have a self-fulfilling prophecy. Yuri Gorodnichenko is a professor of economics at UC Berkeley.
If you want to buy a car and you think inflation is going to be high in the future, then you should be willing to buy this car now rather than later. And if everybody does that, then the price of that car goes up.
I expect prices to be high and end up with higher prices.
Right now, consumers expect high inflation. According to the Michigan Survey of Consumers, they think on average, inflation will be 6.5% in a year and 7.2% in 5 to 10 years.
This is really, really high. It is relatively easy to create this self-fulfilling prophecy.
The only thing holding consumers back from getting out there and buying stuff and kicking off a vicious circle is uncertainty about the economy, Grodnichenko says. But there is a wrinkle in all of this, which is that we consumers, turns out, are usually very bad at predicting inflation.
Consumer expectations haven't been anchored at the 2 percent inflation target for like the last four and a half decades.
Michael Weber is a professor of finance at Purdue University. He says the spark for a self-fulfilling inflation prophecy isn't the number inside consumers' brains. It's whether that number is changing inside their brains. And right now it is. Inflation expectations keep coming down. So we might not know where we are, but we have a better sense of where we're headed.
And if you look at it that way, we should be headed for lower inflation. But a vicious inflation circle that can throw all of that in the air is only ever a few painful grocery bills away. In New York, I'm Sabri Beneshour for Marketplace. Do or do not. There is no try.
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Chapter 3: What insights does Raphael Bostic provide about the Fed's credibility?
Wall Street seems not to be worried about inflation or the State of the Union or anything else except AI. Honestly, we will have the details when we do the numbers. All right, here we go. One more chunk of my interview yesterday with Rafael Bostic, who until Saturday is the president and CEO of the Federal Reserve Bank of Atlanta.
Talk for a second, actually, about the less heralded part of this job. You get all the headlines for monetary policy, but you're a CEO, too. This is radio, so nobody can see it. You're not laughing, not crying, but somewhere in between. Tell me about, you know, this is a big institution. And with all possible respect, what do you know about being a CEO, man? Well, I knew a lot. You know.
No, so I had never been a CEO before. You're an academic, right? You're a policymaker? Yeah, yeah. So, you know, it's interesting. My HUD years were actually quite formative. I feel like there are two types of management. One is where you manage, where you can see every worker. You can know where every person is at every moment. And then there's another kind where you can't do that.
And, you know, HUD is 150, 160 people scattered all over the country. I couldn't do that. And what I found there was if I really tried to have every staff person believe that they could be great, and that they knew that someone had their back, that they wound up doing amazing things. And so I came here trying to do that as well.
And the things that Atlanta Fed is now known for are things that were not my ideas. They're things that came up from the rank and file who thought that there was something that could make us more impactful or make us more effective or efficient. And I tried to give space for that. You did a thing with Dennis Lockhart a couple of weeks ago, your predecessor.
And you said, sorry, let me just pull up the thing that you said. Basically, you stand on the shoulders of those who came before you. You are set up by the people ahead of you, is what you said. As you think about the next person to get this job, whoever that may be, how are you setting them up? You know, that's an interesting way to ask that question.
To me, I feel like I've set them up to be present in communities much more easily. There's an expectation and a comfort with us being around them, which will allow that person to build those connections quicker and have a better sense of what our district is.
I've set them up to work with the staff, and that person will have many options to choose from in terms of what we invest in moving forward. And I think I've set them up to where folks like you will want to talk to them, and that we will continue to have our knowledge be out in the world on a regular basis.
I'm pleased to inform you that's the end of the personal part of this interview, so I know you don't like talking about yourself and what you're doing. Yeah, I saw some clip of you not too long ago saying you hate giving speeches, which I totally understand. Let me get you back to the moment we're in with the central bank and this economy.
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Chapter 4: What factors contribute to the self-fulfilling prophecy of inflation?
And so we have to remain transparent, Not to your first question. I'll just go there. I appreciate your work. I'll just go there. Look, I've been working with these folks for a long time. There's not a lot of ego in those rooms. There have been previous feds where there have been lots of personalities and all that kind of stuff.
Now, we have personalities, but it's not self-aggrandizement or anything like that. And that, I think, is likely to sustain. Now, there's pressure. Just the economist on the one hand, on the other hand thing. I'm just saying. No, because you talked about the attacks, and I've said many times, you should not be a central banker if you don't like to get yelled at. But we get yelled at.
Yeah, but should you be yelled at? I mean, honestly, right? People are going to do what they're going to do, right? So just expect to get yelled at at any time, at any moment, and then just move on. Like to me, that's kind of how I try to approach it. And that'd be my counsel and advice to anyone who's thinking about doing this in the future.
Every interview you do, there's a question you wish you'd asked or a follow-up you wish you had pressed. Here is mine from this one.
I intentionally stayed away from the politics and the politicization and the independence of the central bank in this second Trump term because I figured Dr. Bostic would have said what Fed officials always say, and I mean always, that they just don't think about it. Well, shows me. He released his last quarterly message as bank president today, Dr. Bostic did, in which he wrote this.
The legal and rhetorical battles raging around the central bank right now have caused people across a wide cross section of our population to begin to doubt the Fed's independence. This is a major concern. End of quote and note to self. Dr. Bostic has said only that he is going to take some time off after he leaves the Atlanta Fed. No specifics on that, but maybe a cruise somewhere?
Don't know whether that's his vibe, honestly, but for some, it is a whole lifestyle. Here's today's installment of our series, Adventures in Housing. My name is Brian James, and I live on a cruise ship. That's what I've been doing for the better part of the last eight or nine years.
Everybody that does music like wants to be a star, you know, and you think to be a star, you got to go down this path of writing and recording and releasing. And I found out that you can be totally fulfilled performing, but doing it on a ship. They sit down at your bar and it's just you and a microphone.
And as long as you're playing them what they want to hear, shoot, they'll stick around all week long.
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Chapter 5: How is Anthropic changing its AI safety protocols?
Marketplace's Novosafo is on the AI and the Future of Humanity desk for us today.
Way back when, in the AI dark ages of, oh, 2021, some OpenAI execs left to form what they called the Safer Alternative, Anthropic. Owen Daniels is with Georgetown University's Center for Security and Emerging Technology.
Anthropic has long been one of the frontier labs that's been most acutely focused on ensuring that its systems and applications are used in kind of a safe, responsible and ethical way.
To avoid things like AI that lies to achieve a goal or that builds bioweapons on command. Core to Anthropic's safety effort had been a pledge called the Responsible Scaling Policy, says Sarah Myers-West of the AI Now Institute.
Which essentially says if they believe that the capabilities of these tools outstrip their ability to control them and ensure that they're safe, they would stop building them.
Anthropic says it was trying to stave off a race to a bottom with that policy. But it admits it failed to persuade other companies to take its stricter safety approach. The change it announced yesterday means they may keep building more advanced models, even if they're riskier. Brent Thill, a tech industry analyst at Jefferies, says AI companies are getting more ambitious.
I think there's incredible pressure from OpenAI, from Microsoft, from many of the top technology companies, as AI is going from a consumer-based technology to now inside the enterprise. The race is on, right?
You need more advanced AI to run financial systems versus finding the best latte. And as companies spend hundreds of billions of dollars to build those tools, Georgetown's Owen Daniels says they need to start making money, too.
There is a tension that's difficult for these companies to navigate in deploying the latest versions of models in ways that are economically useful and can be beneficial to their bottom lines.
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