MNI: Collins Sees Fed Holding Steady For A Longer Time

Federal Reserve Bank of Boston President Susan Collins said Thursday she sees slower growth in the United States coupled with near-term inflation from tariffs before a return of disinflationary forces, leaving the central bank on hold for a longer time. 

Collins is "cautiously realistically optimistic for a variety of reasons" about the outlook but she cautioned that "the outlook is much cloudier for a variety of different reasons and that's true on both the inflation and the activity side," she said in fireside chat hosted by the Insurance Women’s Investment Network. "My outlook would have somewhat slower growth. And again, there are risks and uncertainties, and those are more on the downside, whereas the inflation risks are on the upside."

"As I pull all that together, I strongly believe the [FOMC] meeting that we had last week that holding our rate steady was an appropriate policy stance, and I would be looking for that holding steady for a longer time is likely to be appropriate," she said. "So, that is that active patience." 

Collins said "it looks inevitable that tariffs are going to increase inflation in the near term" but the "modal outlook" appears that it would be "short lived with a continuation of disinflation, but further in the future than I might have expected before. There are risks around that, and depending on how things unfold, it may be more persistent and a larger increase." (See: MNI INTERVIEW: Tariff Inflation To Sideline Fed-Ex CEA Econ)

"The underlying strengths are very much still there," Collins said about growth in the economy. "It's important to remind people of that, because I wouldn't want to see a kind of self-fulfilling pulling back, which can be demand slowing, which would be something to watch for as well. So there's a lot of strength and resilience."