Susan Collins, President of the Federal Reserve Bank of Boston, believes that the US economy needs to slow down in order to bring inflation back to the central bank’s target of 2%. In her remarks at a Massachusetts Institute of Technology event, Collins emphasized the importance of aligning demand with supply to achieve lasting inflation outcomes.
Collins noted that current monetary policy should remain unchanged until there is more confidence in inflation moving towards the 2% mark. This is due to recent surprises in economic activity and inflation levels, which have led to ongoing inflation pressures that surpassed earlier predictions. Despite uncertainties around the timing of interest rate cuts, many Fed officials have hinted at the possibility of easing policies depending on data trends.
Collins highlighted the importance of assessing evolving risks and outlooks to adjust policies accordingly. She noted that there is no fixed trajectory for policy decisions and emphasized the need for a methodical and comprehensive approach based on a wide range of information.
Despite recent productivity increases, Collins expressed concern about their sustainability as a lasting trend. She noted that employers are likely equipped to handle higher wage demands and remain optimistic about achieving the 2% inflation goal within a reasonable timeframe. Overall, Collins emphasized the need for careful consideration and assessment as she expressed confidence in the Fed’s ability to navigate through economic challenges and achieve its inflation targets.