February 19, 2021
Fast. Extremely fast.
This is how Dr. Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta, describes the central bank’s response to the Covid-19 pandemic. One thing’s for sure: There were no textbook cases to study up on for guidance. So economists at the central bank acted “extremely fast” (a lesson from previous crises) to craft a new, proactive approach to deal with this global health and economic challenge.
The approach helped to calm financial markets and offer clarity of support by the Fed. And it also gave policymakers a new way to respond to future events. During a recent episode of Talks at GS, Bostic shared some of the changes the Fed made in response to the pandemic, and its potentially long-lasting impact on the economy. Here are some highlights from that conversation.
In the early days of the pandemic, central bankers realized that the data they normally used to understand the economy, like the previous quarter’s results, was too old to be relevant. “Things were changing, and our understanding of what was happening was changing so fast,” Bostic recalled.
A question that’s now top of mind for Bostic: How many of the pandemic-related changes will be permanent versus temporary?
In response, policymakers “have really stepped up our efforts to do real-time reconnaissance of what’s happening in the economy,” he noted. First, the central bank bolstered their surveys and started collecting new surveys in low- and moderate-income communities to get a better idea of how people were impacted. The Fed also tripled the amount of engagement it had with CEOs to get as much real-time information as possible – and that information helps policymakers to craft policy that has maximum effectiveness, he added.
Like many of us, the most Fed employees transitioned to remote work and started using technology in new ways to get work done. A question that’s top of mind for Bostic now is: How much of these workplace changes will be permanent versus temporary – and how industries will adapt? “And that’s going to have real implications for what the labor market looks like, what skills are required from workers, and what kind of training and re-training capacity we’re going to have to have in our economy.”
Finally, Bostic says the pandemic – along with conversations about racial justice and racial equity – have increased awareness about some of the inequities that could spur action and eventually, progress in creating a more inclusive economy. “We need to make sure that we have an economy that works for everyone.”
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