Susan Collins cautions against Fed rate cuts, citing robust economy, steady spending, and tariff-driven inflation risks.
Susan Collins, the President of the Federal Reserve Bank of Boston, has stated that the U.S. economy is still robust enough to postpone Fed rate cut decisions. Collins stated that the central bank can maintain an “actively patient” stance due to strong development and household finances.
Collins claims that the Federal Reserve’s rate cut can be postponed while it monitors the impact of tariffs due to the robust economy
She made this statement during a speech at the 22nd Annual Economic Measurement Seminar of the NABE Foundation in Washington, which business economists hosted on Tuesday. This implies that the Federal Reserve will continue to closely monitor inflation data before making any policy changes or rate cuts.
She believes the present economic vigor allows officials to evaluate new developments thoroughly. The ongoing effect of tariffs is one of those developments.
Collins acknowledged that the prices of certain products are beginning to be influenced by tariffs. Nevertheless, she stated that the extent of the devastation may be less than anticipated. The Fed official clarified that certain companies prefer to tolerate lower profit margins rather than pass costs onto consumers.
In the interim, American households continue to spend despite the price increase. The urgency for a Federal Reserve rate reduction has decreased due to the spending strength, which is mitigating the adverse effects of tariffs on the broader economy.
She also observed that the most recent inflation data presents a varied picture. June’s consumer price report indicated that inflation increased more slowly than economists had anticipated. However, Collins cautioned that pricing pressures from tariffs are still accumulating in certain regions.
More precise Inflation Data Determines Cut
The Boston Fed devised a new tool to assist in comprehending these changes. This instrument assesses how price increases at the U.S. border impact consumers. Collins stated that this research will help the Federal Reserve more precisely monitor the impact of tariffs on inflation before making any decisions regarding Fed rate cuts.
She anticipated that the Federal Reserve’s favored inflation gauge may increase to approximately 3% by the year’s end. In May, that indicator was 2.7%. Collins anticipates that inflation will resume its downward trajectory following its apogee, which could pave the way for a future Federal Reserve rate reduction.
In 2025, Federal Reserve officials maintained consistent interest rates while monitoring inflation and growth. Collins stated that this approach is still appropriate in light of the current circumstances and that the timing of any Fed rate reduction should be determined by more definitive evidence. Her message is consistent with the cautious posture of Cleveland Fed President Hammack, who also contends that inflation remains excessively high to warrant a Fed rate cut.
Meanwhile, the price of Bitcoin experienced a decline after the publication of June’s CPI data. The data was slightly higher than expert estimates, with a year-over-year increase of 2.7%. This reinforces the expectation that a Fed rate cut may not occur in the near future.
