Federal Reserve Bank of Boston President Susan Collins indicated on Saturday she’s leaning against a U.S. interest rate cut next month. The bank faces ongoing risks to both inflation and employment mandates. Collins expressed hesitancy about lowering short-term borrowing costs at the December 9-10 Federal Open Market Committee (FOMC) meeting, stating that current policy is in a ‘mildly restrictive range’ after previous easing measures in September and October. This stance, she believes, is appropriate for the present economic climate. The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913, enacted after a series of financial panics, to provide the country with a safer, more flexible, and more stable monetary and financial system.
The challenge for the Fed, according to Collins, is balancing the risks of above-target inflation with a softening job market. She stated that she perceives risks on both sides, making the decision on monetary policy particularly complex. Collins acknowledged the possibility of dissenting against a rate cut at the upcoming meeting, which is anticipated to be unusually divided, but emphasized she remains undecided and awaits further data before making a final decision.
Over the past few days, various officials have voiced differing opinions on whether to cut the current 3.75% to 4% federal funds rate target range by a quarter-percentage-point. Recent comments from New York Fed leader John Williams, suggesting potential for a further adjustment to move policy closer to neutral, have influenced futures markets, increasing the likelihood of near-term easing. Fed Governor Christopher Waller has even suggested the upcoming FOMC meeting might showcase a rare level of disagreement, countering accusations of groupthink within the Fed.
Collins described the current period as ‘complex’ for setting monetary policy, emphasizing the importance of diverse perspectives. She also noted a relatively benign outlook for the economy, anticipating a slight rise in unemployment and eventual moderation of inflation. Collins added that financial conditions are currently providing some support to the economy and that she would take seriously any significant evidence of further softening and weakness in the jobs market.
