Eric Rosengren Talks Fed

Summary

Bloomberg Talks: "Eric Rosengren Talks Fed"

Date: January 13, 2026
Host: Bloomberg
Guest: Eric Rosengren, Former President of the Federal Reserve Bank of Boston

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Episode Overview

In this episode of Bloomberg Talks, Eric Rosengren, former President of the Boston Fed, joins the show to analyze the Federal Reserve’s immediate policy options amidst persistent inflation, modest labor market growth, and intensifying political pressures. The discussion covers the potential impact of leadership changes at the Fed, the risk to central bank independence, and the likely economic trajectory for the coming year.

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Key Discussion Points & Insights

1. Current Economic Conditions and Inflation Outlook

• Moderation in Easing Expectations:
  • Rosengren notes that the case for the Fed to ease interest rates is presently weaker than it was a quarter ago, primarily due to persistent inflation and a labor market that, while slow-growing, remains stable.
• Inflation Data:
  • "The CPI at 2.7% is substantially above the 2% inflation target. ... If you look at the PC measure of inflation, it's been gradually rising." – Eric Rosengren [00:40]
  • Inflation has remained above the Fed’s 2% target for almost five years.
• Labor Market Overview:
  • Job growth has averaged 50,000 per month, which Rosengren views as reasonable, given stagnant labor force growth due to lower immigration.
  • "The unemployment rate’s at 4.4%. ... very close to what the Fed thinks it will be in the long run." – Eric Rosengren [01:35]

2. Fed’s Policy Options: Cautious Approach Recommended

• Advocates for ‘Wait and See’:
  • Rosengren suggests the Fed is "well situated to wait and see" rather than make rapid policy changes.
  • Fiscal policy is expected to be stimulative in the coming year due to large deficits and the recently passed "big beautiful bill," which contains investment credits and consumer tax relief.
  • "I think the conditions for reasonable growth next year are there." – Eric Rosengren [02:13]
• No Immediate Need for Rate Changes:
  • No urgent justification for changing interest rates as long as growth projections hold.

3. Political Pressure, Powell’s Departure & Fed Leadership Transition

• Political Influences Loom, But Data Remains Central:
  • The host raises concerns that political dynamics and White House jawboning might shift policy outcomes.
  • "It does matter who's in positions to make the decisions." – Eric Rosengren [03:17]
• Power Vacuum and Outlook:
  • Jay Powell’s term ends in May; the administration’s nominee is expected to favor lower rates, reflecting the President’s clearly stated preference.
  • Genuine rate cuts may not occur until a new chair is installed, and even then, convincing the FOMC remains crucial.
  • "It's still not a slam dunk, even with a new Fed chair that rates actually decline..." – Eric Rosengren [03:48]
• Concerns over Independence and Legal Challenges:
  • Ongoing DOJ subpoenas and Supreme Court scrutiny over the Federal Reserve's governance have heightened debates about the Fed’s autonomy.

4. Risks to Federal Reserve Independence

• Historical Context and Modern Threats:
  • Loss of central bank independence is typically associated with developing nations, but current U.S. events are raising red flags.
  • "Fed independence is critically important. ... The Federal Reserve was constructed to be pretty independent from the rest of government..." – Eric Rosengren [05:19]
• Potential Costs of Eroded Independence:
  • If independence is undermined, the next Fed chair may struggle to lower rates or convince markets of the bank's credibility.
  • There’s a risk that "the long end will go up as people become concerned that the policies will generate ongoing inflation higher than what we've historically had." – Eric Rosengren [06:13]

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Notable Quotes & Memorable Moments

• "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 note, they've missed their 2% target for almost five years."
  — Eric Rosengren [00:53]

• "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."
  — Eric Rosengren [01:58]

• "Whoever gets picked [as chair] has to have enough credibility and has to have strong enough arguments that he convinces a majority of the FOMC to vote their way."
  — Eric Rosengren [03:40]

• "To the extent that various actions by the administration undermine the belief that the Fed will stay independent, it will make harder for the next chair to actually lower interest rates, convince people that they are truly independent..."
  — Eric Rosengren [05:47]

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Timestamps for Key Segments

• Fed’s Policy Challenged by Inflation – [00:33] to [02:09]
• Labor Market Analysis – [01:00] to [01:40]
• Fiscal Policy’s Role & 2026 Outlook – [01:48] to [02:13]
• Political Pressures and FOMC Dynamics – [02:31] to [04:09]
• DOJ, Supreme Court, and Independence Debate – [04:35] to [05:47]
• Risks of Lost Independence for Monetary Policy – [05:19] to [06:32]

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Conclusion

Eric Rosengren delivers a sober, data-driven perspective on Fed policy, highlighting that while modest growth and persistent inflation don’t yet justify rate cuts, looming political changes and legal scrutiny threaten the Fed’s historic independence. His measured optimism about fiscal stimulus and guarded caution about political interference provide crucial context for financial markets—and underscore the stakes for U.S. monetary policy in a pivotal year.

Transcript

[A]

Bloomberg Audio Studios Podcasts Radio News. 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.

[B]

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 PC 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 note, 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 rates 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.

[A]

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 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 and you focus on the data, not the politics going on down the street out of the White House. This just feels a little bit different here in 2026, though.

[B]

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 it gets that person gets Senate confirmation, the admin regulations made clear that they're not going to point 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. Well, it's still a committee decision. Whoever gets picked has to have enough credibility and has to have strong enough arguments that he convinces a majority of the FOMC to vote their way. So it's still not a slam dunk, even with a new Fed chair that rates actually decline, particularly if the administration jawboning and potential legal challenges raise concerns about Federal Reserve independence and make some of the voting members. I want to be sure that the economic conditions justify a move.

[A]

Well, given the DOJ subpoenas into Powell, ostensibly into Powell's handling of the renovations of the Fed building, given the Supreme Court arguments scheduled to start next week involving Lisa Cook and the power of the president to actually remove a Fed governor seemingly at will. I am curious, Eric, about this idea of fend independence and whether we should really start looking at this as the beginning of the end. Particularly given the comments out of the three former Fed chiefs yesterday, their statement that they signed, the support today that we saw from monetary policy officials overseas, as well as executives like JP Morgan CEO Jamie Dimon.

[B]

Yes, a Fed independence is critically important. Normally, losing Fed into is something that happens in the third world countries where either they're having trouble managing their deficit, want to get the interest rates down to make it easier easier to issue debt, or they're trying to get interest rates down because they think it'll help them get elected in the upcoming election. The Federal Reserve was constructed to be pretty independent from the rest of government so that this kind of political business cycle doesn't actually occur in the United States. So to the extent that various actions by the administration undermine the belief that the Fed will stay independent. It will make harder for the next chair to actually lower interest rates, convince people that they are truly independent and runs the risk of people start becoming concerned that the Fed no longer is going to focus on inflation, that even if interest rates go down at the short end, the long end will go up as people become concerned that the policies will generate ongoing inflation higher than what we've historically had.

[A]

All right, Eric, I have to leave it there. Always appreciate getting your comments here. Eric Rosengrin, of course, former President of the Federal Reserve bank of Boston.