By Michael S. Derby
NEW YORK (Reuters) -Federal Reserve Bank of Boston President Susan Collins said on Wednesday she’s leaning toward the central bank cutting rates later this year amid an uncertain outlook.
“While I continue to expect it will be appropriate to resume gradual policy normalization later this year, my outlook could change significantly as events unfold, and the economic impact of changes in various government policies comes into sharper focus,” Collins said in a statement released by her bank. “Much will depend on whether the ‘price shock’ from tariffs dissipates quickly,” she said.
The statement released by the Boston Fed described comments made by the bank president during local visits in Massachusetts. Collins weighed in after last week’s Federal Open Market Committee meeting which held the central bank’s interest rate target range steady at between 4.25% and 4.5%, a decision Collins said she supported.
At last week’s meeting, the Fed penciled in two rate cuts later this year but it’s unclear when those might be delivered, even as some Fed governors have signaled openness to act at the late July FOMC meeting.
In her statement, Collins said “I see monetary policy as currently well positioned” in an economy that’s in solid position.
Collins noted there remains considerable uncertainty about the outlook while saying President Donald Trump’s trade policies continue to be one of the biggest drivers of what will happen. These tariffs should lead “to a rise in inflation, slower output growth, and a higher unemployment rate relative to current conditions.”
Collins noted Trump’s pullbacks on some of the most extreme tariffs have reduced inflation risks but she said the jury remains out on what will happen, which means the Fed needs to be very attentive to incoming data. Collins said the tariffs should drive the underlying personal consumption expenditures price index “somewhat above” 3% by year-end.
She added, “over the coming months, I expect the effects of tariffs to show through more significantly, as inventory front-loading wanes and tariffed goods hit the shelves and enter firms’ production processes.”
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
Comments