Boston Federal Reserve Bank President Susan Collins believes that the U.S. economy needs to slow down in order to bring inflation back to the central bank’s 2% target. In her speech at the Massachusetts Institute of Technology event, Collins highlighted the importance of matching demand with supply in achieving sustainable inflation outcomes.
Collins pointed out that current monetary policy should remain unchanged until confidence in inflation moving towards 2% increases, given recent surprises in economic activity and inflation levels. The Federal Open Market Committee’s decision to keep the target rate range overnight was based on ongoing inflationary pressures that have exceeded earlier forecasts.
While there is uncertainty about when interest rate cuts will happen, many Fed officials have suggested that easing policy may be necessary depending on data trends. Collins emphasized the need to assess risks and develop prospects before making any policy decisions, stating that there is no one-size-fits-all approach to policy decisions.
Despite this uncertainty, Collins remains optimistic about achieving the 2% inflation target within a reasonable timeframe, given a strong labor market and consistent long-term inflation expectations. She noted that while productivity may have increased recently, it is unlikely to be a lasting trend and that employers are likely prepared to deal with higher wage demands.
Overall, Collins emphasized the need for a careful and comprehensive approach to policy decisions based on a wide range of information. She expressed confidence in the Fed’s ability to navigate economic challenges and achieve its inflation targets with thoughtful consideration and evaluation.