Federal Reserve Bank of Boston President Susan Collins expressed optimism on Tuesday that further interest rate cuts are likely, citing weakening inflation trends. While acknowledging the unexpectedly strong September jobs report, which initially raised questions about the Fed’s ability to implement significant cuts, Collins maintained a cautiously optimistic outlook.
In a speech prepared for delivery at a conference at the Boston Fed, Collins stated that “further adjustments of policy will likely be needed.” She reiterated the Fed’s September projection of a half-percentage-point cut by year-end, but emphasized that the path is not predetermined. “Policy is not on a pre-set path and will remain carefully data dependent, adjusting as the economy evolves,” she stressed.
The Fed’s recent 50-basis-point rate cut, bringing the overnight target rate range to 4.75%–5%, reflected a response to easing inflation and growing job market concerns. However, the robust September hiring figures challenged initial expectations regarding the extent of future cuts.
Collins acknowledged that core inflation remains elevated but expressed growing confidence in its return to the Fed’s 2% target. She described the labor market as strong, with low unemployment, characterizing the September jobs report as “unexpectedly robust” but ultimately supportive of a healthy labor market – “neither too hot nor too cold.”
Looking forward, Collins highlighted the importance of maintaining current healthy labor market conditions, which she believes requires economic growth near trend levels. While acknowledging elevated wage gains, she noted that high productivity is mitigating their inflationary impact.
