Former Boston Fed President Eric Rosengren Talks US Retail Sales

Summary

Podcast Summary: Bloomberg Talks

Episode: Former Boston Fed President Eric Rosengren Talks US Retail Sales
Host: Bloomberg
Guest: Eric Rosengren, Former President of the Boston Federal Reserve
Date: August 14, 2026

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Overview

This episode features an in-depth conversation with Eric Rosengren, former president of the Boston Federal Reserve, focusing on the state of US retail sales, consumer activity, inflation concerns, and the Federal Reserve’s policy dilemmas. Rosengren provides expert analysis on the underlying trends in economic data, the Fed’s priorities, and market reactions, offering valuable insights for anyone interested in monetary policy and current financial conditions.

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Key Discussion Points & Insights

1. Mixed Signals in Retail Sales and Consumer Activity

Timestamps: 00:32 – 02:18

• The host introduces the main topic: a recent contraction in retail sales, with declines in gas, autos, and online sales, but increases in restaurant spending.

• Rosengren’s Analysis:

  • The Fed focuses on economic trends rather than individual data points.
  • Recent weaker retail sales align with sluggish consumption—only 1.5% growth in the first half of the year, weaker than overall GDP.
  • Investment, especially in AI and technology, is the biggest driver of economic growth now.
  • High oil prices and Middle East tensions have notably impacted lower-income consumers.

  Quote:

  "If you look at consumption over the first two quarters, it only grew at one and a half percent. So that's weaker than the overall economy." — Eric Rosengren (01:12)

• The broader economic picture: Consumption is not propelling growth; investment spending is.

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2. Economic Cycles and the Health of Consumption

Timestamps: 02:18 – 03:07

• Host inquires whether current trends worry Rosengren or reflect normal cycles.

• Rosengren notes consumption remains two-thirds of GDP, so any slowdown is watched carefully.

• Despite a strong stock market, the overall economy is only growing at a modest rate, largely due to weak consumer spending.

  Quote:

  "The economy is growing probably at the appropriate rate overall, maybe a little bit weaker than we'd like. And a lot of that is because the consumer has continued to be somewhat lethargic." — Eric Rosengren (02:28)

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3. The Fed’s Inflation Dilemma and Rate Policy

Timestamps: 03:07 – 04:43

• Host questions why the Fed might consider cutting rates with inflation at 3.4%, above the 2% target.

• Rosengren’s Perspective:

  • Debate centers on whether to raise or maintain rates, not to cut.
  • Some Fed members believe inflation is concentrated in sectors like oil and shelter, and may fall when oil prices decline.
  • Others are concerned that inflation has stayed high despite waiting, and the Fed keeps missing its target.

  Notable Quote:

  “The Fed has been hoping that inflation would come down more naturally by waiting for five years now, and it hasn't happened. ... Once again, the Fed has missed its target by a significant amount.” — Eric Rosengren (03:19)

  • Ongoing division between those advocating patience versus those worried about ongoing high inflation.

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4. Balancing Weak Consumption and Persistent Inflation

Timestamps: 04:43 – 05:28

• Host asks which is more concerning for the Fed: weak consumer spending or persistent inflation.

• Rosengren:

  • The Fed is currently more focused on inflation.
  • Recent communications emphasize the importance of bringing inflation back to 2%.
  • Nonetheless, weak economic data never pleases the Fed.

  Quote:

  “If you look at the press conference that the chair provided after the FOMC, he emphasized that the committee was quite focused on getting an inflation rate back to 2%.” — Eric Rosengren (04:56)

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5. Market Reactions: Bond Yields and Fed Credibility

Timestamps: 05:28 – 07:16

• Host raises the question: Do higher long-term bond yields help the Fed by tightening financial conditions?

• Rosengren’s View:

  • Higher rates, regardless of who initiates them, do help slow the economy.
  • However, if higher yields reflect doubts about the Fed’s ability to curb inflation, that’s a credibility problem.
  • Global factors (e.g., Japanese monetary policy, U.S. fiscal deficits) also affect yields.
  • The rise in yields post-FOMC press conference suggested markets questioned the Fed’s resolve on inflation.

  Notable Quote:

  “If the reason the long rate is up is because they're not confident that the Fed will bring inflation down, that's a problem for the Fed.” — Eric Rosengren (05:58)

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6. Fed Communication and Market Clarity

Timestamps: 07:16 – 08:30

• Host discusses the new Fed Chair’s (Warsh) apparent preference for less communication and the associated complications.

• Rosengren’s Commentary:

  • Only the Chair can speak for the committee, so clarity from that role is key.
  • Forward guidance isn’t necessary, but context for decisions helps justify the committee’s actions.
  • Transparency, especially post-FOMC, is valuable for market understanding.

  Quote:

  "It's important for the chair to basically say the reason the committee made the decision they did is the following. ... It is important to justify what the majority of the committee decided at each meeting." — Eric Rosengren (07:32)

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Notable Quotes & Memorable Moments

• On the limits of optimism:

  "The Fed has been hoping that inflation would come down more naturally by waiting for five years now, and it hasn't happened."
  — Eric Rosengren (03:19)

• On the need for clarity:

  "You don't have to provide forward guidance, but I think it is important to provide a little bit of context for why decisions are being made."
  — Eric Rosengren (07:32)

• On market skepticism:

  "If the reason the long rate is up is because they're not confident that the Fed will bring inflation down, that's a problem for the Fed."
  — Eric Rosengren (05:58)

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Important Timestamps

• 00:32: Episode topic introduced; retail sales discussion begins
• 01:12: Rosengren’s analysis on weaker retail sales and economic drivers
• 02:28: Consumption’s role in GDP; concerns over consumer spending
• 03:19: Debate within the Fed over rate policy and inflation persistence
• 04:56: Fed’s current focus on inflation over growth concerns
• 05:58: The implications of rising long bond yields and market confidence
• 07:32: The importance of clear Fed communication under Chair Warsh

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Conclusion

This episode offers a nuanced take on the conflicting data in the US economy, emphasizing the delicate balance the Fed must strike between taming persistent inflation and managing weaker consumer spending. Eric Rosengren highlights the importance of investment versus consumption in driving growth, the need for clear and contextual Fed communication, and what market reactions signal about central bank credibility. Listeners gain an insider’s view into the complexities facing the Fed’s decision-makers in today’s economic environment.

Transcript

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[Bloomberg Host]

Bloomberg Audio Studios, podcasts, Radio news. Let's bring in Eric Rosengran. He's the former president of the Boston Federal Reserve. And Eric, I do want to start with the state of the consumer and we'll get to inflation in a second. But I was looking at that retail sales number today, that contraction overall. Gas and autos obviously dragged down a lot of it. Online sales too, but I looked at restaurants, that was up. So we're still spending somewhere. And there were a lot of other categories that seem to suggest the consumer is still spending. What does a debate look like amongst Fed members when you kind of have data even in one report and even the trend line that seems to kind of, let's just say, conflict with each other?

[Eric Rosengren]

So the Fed doesn't focus just on one number, it does tend to focus on a trend. But I think a weaker retail sales number is consistent with what we've been seeing in consumption for the first half of the year. So if you look at consumption over the first two quarters, it only grew at one and a half percent. So that's weaker than the overall economy. It's a lot weaker than what's been happening. Investment. So we have an economy where kind of AI and tech investment are driving investment spending. But the consumer has been buffeted by higher oil prices, maybe some concerns about what's going on in the Middle east. And as a result they've been somewhat more reluctant to buy, particularly for those low income individuals who are likely to be more strapped by the oil prices going up. So I think the picture that this retail sales provides is pretty consistent with consumption. That's not really driving the economy right now. What's really driving the economy is investment spending.

[Bloomberg Host]

Well, I'm curious, does that worry you at all or is this just sort of the natural cycles that the economy goes through from time to time?

[Eric Rosengren]

Well, if the consumer was a little bit. I mean consumption is an important component of GDP. It's roughly 2/3 of spending, is 2/3 of all GDP. So any time consumption slows down, economists tend to pay attention. But I think what we have is a somewhat different balance than we normally see, particularly in an environment where the stock market has been going up so strongly. So the economy is growing probably at the appropriate rate overall, maybe a little bit weaker than we'd like. And a lot of that is because the consumer has continued to be somewhat lethargic.

[Bloomberg Host]

What about inflation? It's now at around 3.4%. I mean, that's well above the Fed's 2% target. How do you make the case of why the Fed should cut rates with inflation this sticky?

[Eric Rosengren]

So I think the, the debate is really going to be about whether the Fed should raise rates or leave the same. As you point out, the CPI number that came out the beginning of this week at 3.4% as well above the Fed's target. I think those that are willing to wait are arguing that when you take out food and energy, shelter has not been going up nearly as rapidly and it's not widespread increases. So they think as oil prices come down, we'll see the overall inflation rate come down. I think the other side of the argument is that the Fed has been hoping that inflation would come down more naturally by waiting for five years now, and it hasn't happened. And so I think there's a subset of the committee that is concerned that we keep expecting inflation to come down. But, you know, when we get through a couple of quarters, we find that once again, the Fed has missed its target by a significant amount. So I think for those that are concerned that inflation has been quite high, they're probably still going to have that concern. And for those who want to wait, I think they're still going to argue that it's being driven primarily by oil prices and that when oil prices come down that there'll be less concern about inflation.

[Bloomberg Host]

And you made the point that the Fed usually takes a look at the data in their totality, but on one hand you have higher inflation and on the other you have a weakening consumer. Which do you think, if you were just to pick between the two, is scaring the Fed more?

[Eric Rosengren]

Well, I think right now they're pretty focused on inflation. So if you look at the press conference that the chair provided after the fomc, he emphasized that the committee was quite focused on getting an inflation rate back to 2%. So they're never going to be happy when we get weak real economic data. And but I think right now they're going to be primarily focused on what are the expectations for how long it takes inflation to come down to the 2% inflation target.

[Bloomberg Host]

I want to get your thoughts also on this idea of how the market reacts to this and particularly with some of the moves that we've seen in the bond market, particularly on the longer end of the curve with that 30 year yield going up, obviously a reflection of longer term concerns, certainly about inflation, fiscal deficits and the like here. Does that, I mean, not to be glib about it, but that does that kind of do some of the work for the Fed if the bond market continues to reprice down the price down yields up on the longer end.

[Eric Rosengren]

So it does slow down the economy if we have higher rates, and that's whether it's initiated by the Fed or other conditions. But if the reason the long rate is up is because they're not confident that the Fed will bring inflation down, that's a problem for the Fed. That's really not the way they want the market to tighten because they have less confidence in the Fed doing what they're saying they are supposed to do. I think that the deficit obviously is an issue. And as we've seen in Japan, there's been concern about interest rate differentials between the Japanese and the United States and they're worried that they're going to be selling treasury securities in order to be able to defend their currency. So I think there are a variety of factors going on for why the long end is up, but I don't think it's a little bit glib to just say that the market is doing the Fed's work for it. I think you have to interpret why it's moving and I think the reasons why it's probably moved up. It started moving up at the press conference. That was an indication that they weren't as confident that the actions of the Fed. We're going to be commensurate with how they described what they're planning on doing on inflation.

[Bloomberg Host]

Based on what we learned out of the last meeting with Fed Chair Wash, the idea is that communication, at least from him, is likely to be a little bit less than maybe what we got out of his predecessors. Does that complicate things for the market and for that matter, in turn, back on Kevin Warsh.

[Eric Rosengren]

Well, there are other Fed presidents and governors who are speaking and I think there were people speaking on both sides of the last decision. I think the challenge is that there's only one person who can speak for the entire committee and that's Chair Warsh. And if he doesn't speak for the whole committee, then you have a bunch of people speaking from their own viewpoint. And I think it would actually be good. You don't have to provide forward guidance, but I think it is important to provide a little bit of context for why decisions are being made. And since, especially coming out of an FOMC meeting, I think it's important for the chair to basically say the reason the committee made the decision they did is the following. And that doesn't have to be forward looking. It doesn't have to say anything about what they're going to do in the future. But I do think it is important to justify what the majority of the committee decided at each meeting.

[Bloomberg Host]

All right, Eric. Always appreciate it. Eric Rosengren, former Boston Fed President there

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