
With uncertainty about the U.S. economy lingering, at least one Federal Reserve official is signalling the Fed’s rate cuts may need to be slowed down.
Susan Collins, the Federal Reserve Bank of Boston President, said a slower approach to adjusting interest rates is merited now as officials confront “considerable uncertainty” over the U.S. economic outlook.
Bloomberg reported that Collins, in remarks for an event Thursday in Boston, said the economy was in a “good place,” but noted that progress on cooling inflation will likely be slower this year than previously anticipated. The uncertainty about new economic policies under the incoming Trump administration and a new Congress may also change the economy’s trajectory, though it’s still too early to estimate exactly how that will play out, she said, according to Bloomberg.
The Fed’s “policy is well positioned to adjust as required to evolving conditions – holding at the current level for longer if there is little further progress on inflation, or easing sooner if the need arises,” Bloomberg quoted Collins as saying.
Collins told Bloomberg in an interview she “favored fewer rate cuts” this year than she had anticipated just a few months ago. She told the network her outlook for interest rates was consistent with the median projection from officials released after the Fed’s December meeting, which pointed to two quarter-point reductions this year.
Policymakers cut interest rates for a third consecutive time at their December gathering, lowering their benchmark by a quarter percentage point and bringing the total amount of reductions last year to a full percentage point. Many Fed officials have said it’s now appropriate to slow down the pace of rate cuts as inflation remains above their 2% target and the labor market healthy.
Collins, who will vote on this year’s policy decisions, said Thursday her support for the December move was a “close call.”