Federal Reserve (Fed) Bank of Boston President Susan Collins noted on Thursday that the Fed’s challenge at this point is having to choose between maintaining a tight policy stance, or trying to run ahead of data that might be souring in the future.
Key highlights
I’m cautiously and realistically optimistic about the economy.
The economy started 2025 in a good place.
Inflation had come down but was still elevated at start of year.
The outlook now is much cloudier for inflation and growth.
It’s inevitable tariffs will increase inflation in the near term.
It remains a question how long tariff-driven inflation will last.
Inflation risks are on the upside.
I strongly supported the Fed’s decision to hold rates steady.
I expect the Fed will likely hold rates steady for longer given outlook.
Holding rates steady for longer time seems appropriate.
The baseline outlook is one-off tariff hit to inflation.
If tariffs keep coming, different trajectory on prices.
Watching inflation expectations is important right now.
Price expectations get more vital with more tariffs.
Federal layoffs are still small relative to aggregate size of labor market.
Economic uncertainty causes businesses to pull back.
It’s too early to tell if data turning weaker.
The economy’s underlying strengths are still there.
Fed policy needs to be actively patient and flexible.
Do not want to be behind curve, or to overreact.