MNI: Fed's Collins Says Some Additional Easing Is Needed
MNI (WASHINGTON) - Federal Reserve Bank of Boston President Susan Collins said Wednesday additional adjustments to interest rates will be appropriate over time, but the aim is not to move too hastily.
"I expect additional adjustments will likely be appropriate over time, to move the policy rate gradually from its current restrictive stance back into a more neutral range," she said in prepared remarks. "The FOMC will need to make decisions meeting-by-meeting, based on the data available at the time and their implications for the economic outlook and the evolving balance of risks."
Additional policy easing is needed because current policy remains "at least somewhat restrictive" but the final destination is uncertain, said Collins. "The intent is not to ease too quickly or too much, hindering the disinflation progress to date. At the same time, easing too slowly or too little could unnecessarily weaken the labor market."
SUSTAINING FAVORABLE OUTLOOK
The combination of disinflation with a labor market near full employment is taking place amid robust output growth, she said, and the risks to the favorable baseline outlook are roughly in balance. "Inflation is returning sustainably, if unevenly, to 2%, and to date, labor market conditions are healthy overall."
She said it would be no surprise if measured progress on a 12-month basis slows a bit in the near term, as the low readings at the end of last year drop out of the 12-month computation window. "This will likely continue until we are past the higher numbers from early this year."
The primary job for monetary policy in this context is sustaining these favorable conditions over time, focusing on both sides of our dual mandate, she said in a speech to the University of Michigan’s Gerald R. Ford School of Public Policy. (See: MNI INTERVIEW: Fed Cuts To Continue But Neutral Not Far-Tracy)
"Policy is well-positioned to deal with two-sided risks and achieve our dual mandate goals in a reasonable amount of time," Collins said. "The policy adjustments made so far enable the FOMC to be careful and deliberate going forward, taking the time to holistically assess implications of the available data for the outlook and the associated balance of risks."