MNI: Fed’s Collins Calls For Gradual Approach To Rate Cuts
MNI (WASHINGTON) - The risk that inflation could be linger for longer than anticipated calls for a cautious approach to future interest rate cuts from the Federal Reserve, Boston Fed President Susan Collins said Thursday.
“This context calls for a patient approach to policy – taking the time to fully assess available information and not over-reacting to individual data readings, as we calibrate policy meeting by meeting,” Collins said in prepared remarks. “As in the median SEP projection, this likely implies a more gradual approach to policy normalization.”
Collins said the economy and monetary policy are currently well-positioned, adding she saw the December rate cut as a “close call” that served as insurance against possible further deterioration in labor market conditions.
She said policymakers must monitor inflation data for signs that price pressures will prove more stubborn, although she is optimistic that more disinflation will take place because much of the continued elevated inflation stems from housing service costs that are expected to ebb with time.
“Looking ahead, my current outlook is broadly in line with the median forecast in the December FOMC Summary of Economic Projections,” Collins said. That median showed two cuts penciled in for 2025.
“In particular, I expect inflation in 2025 to run somewhat higher than I previously thought, with the risks likely having shifted to the upside.”
Collins added that her “concerns about emerging labor market fragility have decreased more recently, as the unemployment rate stabilized after rising notably in the first half of 2024.”