Fed’s Collins expects more rate cuts amid falling confidence inflation, by Reuters

By Michael S. Derby

NEW YORK (Reuters) – Boston Federal Reserve Bank President Susan Collins said on Tuesday that with inflation trends easing, it was highly likely that the U.S. central bank could cut more interest rates.

“Further policy adjustments will probably be needed,” Collins said in the text of a speech to be delivered ahead of a conference at her bank.

Noting that Fed officials had forecast cuts of half a percentage point by the end of the year at their policy meeting in September, she said: “I would emphasize that policy is not on a set path and will remain data-driven, adjusting as the economy. evolve.”

Collins weighed in on monetary policy following Friday’s very strong September employment data, which challenged the idea of ​​how much rate cuts the Fed might be able to offer.

The Fed cut its overnight target rate range by 50 basis points last month to between 4.75% and 5% as officials took their foot off the brakes as inflation eased and labor market concerns grown up But recent employment data was stronger than many expected, raising questions about whether the Fed will be as aggressive with future cuts compared to their latest forecasts.

Collins said that while core inflation pressures remain elevated, she is increasingly confident that inflation is returning to the Fed’s 2 percent target.

She said she sees the job market as strong with low unemployment. “Recent data, including September’s unexpectedly solid jobs report, reinforces my view that the labor market remains broadly in a good place — not too hot, not too cold,” she noted.

Looking ahead, “it will be important to maintain the current healthy labor market conditions,” she said, noting that “that would require economic activity to continue to grow close to trend, which is my baseline outlook.”

Collins also said that wage gains remain high, but stressed that high productivity levels are helping to keep those gains from contributing significantly to inflation.