Federal Reserve Bank of Boston president Susan Collins signaled that holding interest-rates steady would be “appropriate for now” as inflation is likely to stay elevated for some time.
The labor market, she added, appeared to be cooling, but not rapidly.
“If I were seeing evidence that the labor market were notably deteriorating, I would take that very seriously and that certainly could justify near-term additional easing,” Collins said in an interview with Bloomberg’s Odd Lots podcast on the sidelines of the Boston Fed’s annual economic conference. “We haven’t seen a significant unemployment change.”
Instead, she said the Fed’s current policy setting was “balancing those risks on the labor market side with continued risks related to inflation.”
Collins is among a growing number of policymakers who’ve expressed concern about lowering rates further in the face of inflation that’s still a full percentage point above the Fed’s 2 percent target. Minutes of the Fed’s October meeting showed many officials believed it would be appropriate to hold interest rates steady for the remainder of the year.
During a separate interview with CNBC on Friday, Collins said the release of September labor market data didn’t significantly change her outlook for the labor market, as most of the growth was concentrated in industries like health care and leisure.
“I do think mildly restrictive policy is very appropriate right now, and that makes me hesitant as I look forward to think about what the next policy moves should be,” she said.
In the podcast, the Boston Fed chief said that after two straight quarter-point rate cuts this year, the Fed’s banchmark rate is now “much closer” to a neutral stance, where it would neither cool nor boost economic activity.
Collins also signaled her optimism that price pressures will fade once the impact of tariffs works its way through the economy.
“Inflation is likely, I think, to stay elevated through the rest of this year into early next,” she said. “Once the level has adjusted, you don’t get additional impacts, but that can happen over time.”