MNI: Collins Sees Lower Fed Rates To Keep Favorable Economy
MNI (WASHINGTON) - Federal Reserve Bank of Boston President Susan Collins said Tuesday interest rates will need to fall further to keep the economy in the good place where it is now.
She's increasingly confident that inflation is headed back to the Fed's 2% target and the labor market is currently healthy, but said the risk that the economy could slow by more than needed is rising.
"The FOMC began the process of normalizing the policy stance at its meeting last month. Further adjustments of policy will likely be needed," she said in remarks prepared for a community banking conference in Boston, adding the median FOMC official penciled in another 50 bps of easing this year. (See: MNI: Job Boom Means Slower Fed Cuts, Pause Possible - Ex-Staff)
"Preserving the current favorable economic conditions will require adjusting the stance of monetary policy, so as not to place unnecessary restraint on demand," she said.
Recent revisions to growth data point to a solid and resilient U.S. economy, with strong fundamentals underpinning consumer strength, she said. The effects of monetary policy are being felt and the labor market is cooling, she noted.
"The recent data, including September’s unexpectedly robust jobs report, bolster my assessment that the labor market remains in a good place overall – neither too hot nor too cold," she said. "As Chair Powell noted in his August remarks at Jackson Hole, we do not seek or welcome further cooling in labor market conditions."
As conditions normalize, "the economy is somewhat more vulnerable to adverse shocks," she said. "My confidence in the disinflation trajectory has increased – but so have the risks of the economy slowing beyond what is needed to restore price stability."