MNI BRIEF: Fed's Collins Favors Holding Rates For Some Time

Federal Reserve Bank of Boston President Susan Collins said Wednesday she supports holding interest rates steady for some time, in part so officials can assess some of the effects of the easing since September. 

"Given my baseline outlook, it will likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment," she said in prepared remarks for a bankers conference in Massachusetts. "I see several reasons to have a relatively high bar for additional easing in the near term."

Monetary policy is "still mildly restrictive" and broad financial conditions are a tailwind for economic growth, she said. "Providing additional monetary support to economic activity runs the risk of slowing – or possibly even stalling – the return of inflation to target." (See: MNI INTERVIEW: More Fed Cuts Risk Inflation Spike-Weinberg) 

"I am very mindful that inflation has now been above the Fed’s 2% target for nearly five years, which carries the risk of inflation becoming entrenched above target," Collins said. "In this context, it is essential to restore price stability in a reasonable amount of time." 

With resilient demand, the downside risks to employment, while present, do not seem to have increased further since the summer, she said. "Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown."