Kartik Athreya on His First Year as Research Director of the New York Fed

A year has passed since Kartik Athreya became director of research at the New York Fed. To get some perspective on his experience thus far, we caught up with Kartik and asked about his views on economics, the role of Research at the Bank, and his take on a few of the hot topics of the day.

Q: You joined the Bank from the Richmond Fed. In what ways, if any, does the role of an economist at the New York Fed differ from that of other economists in the Federal Reserve System?

Overall, I think the roles are similar, though the size of the Research Group here allows us to have more (and deeper) areas of specialization. We have a great deal of strength in financial market function—from money markets onward—and we combine that with the broad strengths we have in covering the nonfinancial economy in which we all live and on which our well-being ultimately depends. One aspect of being at the New York Fed that I think stands out is our acceptance of the reality that in any economic crisis, our place in the economy means we drop everything to firefight. All economists working here get that.

Q: Over the past year, the most read posts on Liberty Street Economics underscored that many consumers are feeling financial stress. What has stood out for you about the research coming out of the New York Fed since you joined the Bank?

One of the fairly unique things about the Research Group is that we’ve long maintained a focus on the consumer’s pocketbook. We do this in many ways, perhaps most visibly with our Household Debt and Credit Report, which has tracked the increases in household borrowing and delinquency rates that have taken place over the past few years. As we put the pandemic more firmly in the rearview mirror, we saw that fiscal policy support to households was wound down, and we also saw Federal Reserve policy that tightened rates starting in 2022 and has kept them above longer-run levels since. Consistent with these policy changes, the labor market now looks to be operating more like its longer-term norms, which changes what consumers can expect if they lose their current job or want to search for a new one.

For consumers living paycheck to paycheck, all of this has meant paying much more attention to spending. And even for those further away from the economic edge, these changes in the consumer environment have not gone unnoticed. Our team has monitored this shift in perceptions and behaviors through our SCE Household Spending Survey, conveying our findings on Liberty Street Economics and the Center for Microeconomic Data.

Q: A few notable topics have been covered in-depth on Liberty Street Economics since you joined the Bank. What has particularly resonated with you?

A mega-theme, if you will, of the last year has been understanding the extent to which the reductions in inflation we have already seen can be expected to land inflation back at or near the Federal Reserve’s 2 percent target. This past year, Liberty Street Economics gave this topic—core to our mission, of course—a lot of attention. To me, two aspects of this work are worth noting. 

First, my colleagues have been thinking about the connection between wages that are being paid in the marketplace and inflation in the prices of things we buy, which we target as a part of the Fed’s mandate. Intuitively, if we see wages moving up very rapidly but don’t see more fundamental forces supporting that rise, we may have concerns that the wage increases will pass through to price inflation. Part of this is assessing how “tight” the labor market itself is, something that a new measure we introduced recently via Liberty Street Economics does quite well.

A second, and perhaps very familiar, aspect of inflation management is assessing consumers’ expectations for the future. After all, if everyone (or even most of us) expected inflation to be higher in the future than it is today, then those of us naming prices for the things we sell will respond. If you’re a business this is easy to see of course, but it may include us as workers. We are sellers, if you will, of our labor time, and might seek higher wages.

For the Federal Reserve, then, we must work to ensure that expectations are always in a place consistent with our target. But expectations live in peoples’ heads, so we have to extract them from market prices, or, more directly, ask them what those expectations are. And the asking is a very special operation we do here at the New York Fed, through the Survey of Consumer Expectations.

Q: We’re approaching the fifth anniversary of the start of the COVID lockdowns in March 2020. What are some ways the Research Group has responded during this period?

One of the things we do at the New York Fed is develop metrics that summarize how specific parts of the economy are doing, one example being the Corporate Bond Market Distress Index.

We’ve also debuted two indicators: Multivariate Core Trend (MCT) Inflation and Reserve Demand Elasticity (RDE). The MCT is emblematic of measures that try to get at the “true” state of the economy—here, inflation—when we are stuck with measures that are “noisy” or imperfect. My colleagues proposed a new—and they argue, better—way to gauge what inflation is, “really.” Indeed, monetary policy will always face this problem of “signal extraction,” and we are at the leading edge of how best to deal with it. The other offering is our newest. It is the RDE, which provides highly up-to-date information on the “scarcity” of reserves—a form of central bank money that is key to our implementation of monetary policy. This product would not have been needed in the old way we implemented monetary policy. But when times change, so do we—kudos to my colleagues for creating this new tool. One great aspect of it is that it will help the Federal Reserve ensure the smooth functioning of money markets, which further aids in how we communicate the stance and path of policy.

Q: What can you share about any new projects or areas of research that are emerging for the Research Group?    

Our strength in survey work is very exciting for me. Let me be selfish and relay something I am personally involved in: With my colleagues in Research, we are investigating how to better assess the degree to which consumers understand the credit contracts they are in. This is exciting for me because I’ve never used surveys in my own work, so I am learning the complexities of that way of learning about the world. At a department level, there is of course a ton of cool work ongoing, way more than I can highlight while being fair to my colleagues. I invite people to spend time on our main research site, and of course, on Liberty Street Economics! This is an amazing place.

How to cite this post:
, “Kartik Athreya on His First Year as Research Director of the New York Fed,” Federal Reserve Bank of New York Liberty Street Economics, February 28, 2025, https://libertystreeteconomics.newyorkfed.org/2025/02/kartik-athreya-on-his-first-year-as-research-director-of-the-new-york-fed/.