Fed/Collins: We Should Continue to Gradually Lower Interest Rates

Forex - Boston Fed President Susan Collins sees both a recovery in inflation and a greater risk of softness in the U.S. labor market, and expects policymakers to continue gradually lowering interest rates as they assess the situation. Speaking at the Gerald R. Ford School of Public Policy at the University of Michigan, Collins stated, "While the ultimate destination is uncertain, I believe there is a need for some additional policy easing since current policy remains, at least to some extent, restrictive. I think it would be appropriate to make further adjustments over time to move the policy rate from its current restrictive stance to a more neutral range. The aim is not to go too fast or too far in easing, which could prevent the decline in inflation seen to date. At the same time, easing too slowly or too little could unnecessarily weaken the labor market.” Collins noted that the U.S. economy has fared better than many expected in the face of the Fed's most aggressive interest rate hike campaign in the last four decades from 2022 to 2023. She attributed some of the cushion created by high interest rates to consumers' savings during the pandemic and to businesses and households locking in their debts at lower levels before the Fed began its rate hikes.