During an interview at the Kansas City Federal Reserve's Jackson Hole Economic Policy Symposium in Moran, Wyoming, Susan Collins, the President and CEO of the Federal Reserve Bank of Boston, voiced her reservations on Wednesday about supporting additional interest rate reductions amid continued high inflation and limited data availability due to the government shutdown.
Collins stated, "Given my baseline outlook, it will likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment." She added, "I see several reasons to have a relatively high bar for additional easing in the near term."
As a voting member of the Federal Open Market Committee (FOMC), Collins's stance underscores the growing division among committee members, with Chair Jerome Powell indicating in October that a cut at the December meeting is uncertain, despite market expectations.
Although Collins supported the quarter-percentage-point rate cut at the October meeting, she cautioned that further easing might impede the Fed's goal of lowering inflation. "Against this backdrop, providing additional monetary support to economic activity runs the risk of slowing – or possibly even stalling – the return of inflation to target," she remarked.
Despite some softness in the labor market, Collins stressed that inflation risks demand caution, as the risks to employment haven't significantly worsened since summer. The complexities of the government shutdown further influence her perspective. While the impasse seems resolved, key data reports could remain unavailable, complicating decision-making.
Collins highlighted, "Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown."
At the October FOMC meeting, the decision to implement the rate cut was supported by a 10-2 vote. Governor Stephen Miran voted against, favoring a larger reduction, while Kansas City Fed President Jeffrey Schmid opposed because he desired no cut.