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Fed Boston President Susan Collins made notable remarks on Tuesday, signaling that the Federal Reserve could consider further interest rate cuts as inflation shows signs of easing.
Speaking at a conference hosted by her bank, Collins said, “Further adjustments in policy may be needed,” while referencing the possibility of future actions by the Fed. Collins also highlighted the Fed’s latest forecasts, noting that officials predicted a half-point rate cut by the end of the year during the September policy meeting. However, she emphasized the flexibility of monetary policy, stating, “Policy is not on a preset path, and as the economy evolves, adjustments will be carefully data-dependent.”
These comments followed the release of stronger-than-expected September hiring data, which challenged expectations for multiple rate cuts. Last month, the Fed reduced its overnight target interest rate range by 50 basis points to 4.75% to 5%. This decision was based on concerns over declining inflation and the labor market. However, recent robust employment reports have raised questions about the Fed’s approach and suggested that future rate cuts might be less aggressive than initially anticipated.
Despite rising core inflation, Collins expressed growing confidence that inflation is gradually returning to the Fed’s 2% target. She described the labor market as “strong,” pointing to the low unemployment rate. “Recent data, including the unexpectedly strong September jobs report, support my assessment that the labor market is generally in a good place—not too hot, not too cold,” Collins noted.
Future Outlook and Wage Growth
Looking ahead, Collins emphasized the importance of maintaining the current health of the labor market, which she tied to continued economic growth at a near-trend pace. “This is my baseline view,” she added.
On the topic of wage growth, Collins acknowledged that wage increases remain high but noted that rising productivity levels are helping to prevent these wage gains from becoming a significant driver of inflation.
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