Boston Fed chief cites margin pressure as challenge for Maine banks

Photo / Courtesy Federal Reserve Bank of Boston Susan M. Collins is president and CEO of the Federal Reserve Bank of Boston, one of the regional reserve banks in the Federal Reserve System.

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By Renee Cordes

While Maine banks are a strength of the state's economy, they also face headwinds in today's competitive environment, the head of the Federal Reserve Bank of Boston told the Maine Bankers Association at its annual meeting.

"Banks face challenges, in addition to those in the current interest rate environment," Susan M. Collins said at Friday's gathering in Boston. "Evolving customer preferences require increasing investment in technology, and you're seeing increased margin pressure related to competition for deposits, and competition from new market entrants."

The Maine Bankers Association is a Westbrook-based trade association led by President Jim Roche. The group's 29 retail bank members operate 443 offices across the state and together employ more than 9,000 people.

As president and CEO of one of the regional reserve banks in the Federal Reserve System, Collins serves on the Federal Open Market Committee, the monetary policymaking body of the United States.

The Scotland-born economist of Jamaican descent, a naturalized U.S. citizen, was raised in New York City. Her remarks to the Maine Bankers Association members come nearly a year after her first visit to the Pine Tree State since taking office in July 2022.

"In my recent visits to your state, I spoke with a range of people, and learned about some of the unique challenges and economic strengths," she said Friday, according to a text released by her office.

While strengths include rich natural resources on land and sea and the state's banking sector, she said that Maine's aging population tends to reduce the availability of labor. She also cited access to affordable housing as a major obstacle.

"Maine employers told me about their difficulties finding and hiring workers for needed roles, in part because prospective employees are unable to find affordable housing in the area," she said. "And I know that expanding access to broadband in Maine's rural counties has been a challenge, but remains a priority."

'Realistic optimist' on U.S. economy

As for the U.S. economy, Collins said she remains a "realistic optimist — realistic about the uncertainties and risks to my baseline outlook, but optimistic that price stability can be restored with an orderly slowdown in activity, and only a modest unemployment rate associated with supply and demand in labor markets coming into better balance."

Her remarks came a day after U.S. central bankers left interest rates unchanged. However, the Fed will keep the door open to future rate hikes "if risks emerge" that would stand in the way of monetary policy goals, the Federal Open Market Committee said in its statement.

Adding to that theme, Collins said that "policy remains well-positioned to proceed cautiously in this uncertain economic environment, recognizing and balancing the risks while remaining resolute and data-dependent, with the flexibility to adjust policy appropriately as conditions warrant."