Three months after U.S. central bankers last lowered borrowing costs, the head of the Federal Reserve Bank of Boston is urging a measured approach to monetary policy.
“Monetary policy should be based on an assessment of where the economy is heading, and
based on my outlook I see a patient, deliberate approach as appropriate,” Susan M. Collins, the bank’s president and CEO, told a conference on Friday.
“My baseline features a still-uncertain inflation picture, with continued upside risks,” she noted. “This, combined with recent evidence suggesting a relatively stable labor market … argues for maintaining policy rates at their current, mildly restrictive levels for some time.”
Her remarks, delivered at an event hosted by the Springfield (Mass.) Regional Chamber, come three months after the U.S. Federal Reserve cut its benchmark federal funds rate by 25 basis points to a target of 3.5% to 3.75%.
The Fed’s next meeting is scheduled for March 17 and 18. A jobs report released on Friday showed an unexpected loss of 92,000 non-farm payroll jobs in February.
Without touching on the latest data published hours before her speech, Collins said she does not “see an urgency for additional policy adjustments” and will look for clear evidence – likely in the second half of the year – that inflation is moving durably toward the 2% target.
“It remains very important to continue assessing the incoming data in their entirety – and policy is well-positioned to adjust as needed, depending on how conditions and the outlook evolve,” added Collins, a member of the interest-rate setting Federal Open Market Committee.
Inflation outlook
Highlighting the critical role of small businesses across New England and some of the challenges they face, Collins said there are also innovative startups solving problems and building new businesses on the region’s legacy strengths. They include Tanbark Molded Fiber Products, a Saco-based manufacturer of fiber packaging.
U.S. inflation was 2.4% in January.
Collins said a national survey of small businesses cites inflation as the “single most important problem” they face and warned of further tariff-related price pressures after the current temporary 10% global tariffs expire in July.
“More broadly, an important issue for the inflation outlook is the extent to which firms will pass productivity through to consumer prices, limiting upward pressures on inflation from solid demand,” she said. “This most likely to occur if there is price competition as more firms adopt new technologies, and new firms enter profitable markets. This process, however, could take time.”
As a result, Collins said her outlook “has demand exerting some upward pressure on prices, slowing the return of inflation to 2%.”
