Fed’s Collins Expects Other Rate Cuts As Long As Inflation Eases

Boston Fed president Susan Collins said Tuesday that the central bank will likely need to cut interest rates further and that the next phase of monetary policy should focus on preserving the economy.

Pointing to the consensus among her colleagues for two more 25 basis point rate cuts this year, Collins said in a speech in Boston that “further adjustments of policy will likely be needed.”

She stressed that rate cuts are not on a pre-set path and that the Fed will remain data-dependent.

But she also invoked a warning from Fed Chair Jerome Powell in August that the Fed does “not seek or welcome further cooling in labor market conditions” — a clear signal that policymakers were now more focused on maximizing employment than controlling inflation.

Collins joins the chorus of other Fed officials who have indicated they favor further rate cuts following the Fed’s first cut in more than four years, a jumbo-sized 50 basis point cut initiated on Sept. 18 that was designed to get ahead of any weakness in the labor market.

On Tuesday, Federal Reserve governor Adriana Kugler said that she favors more cuts if inflation continues to drop. St. Louis Fed president Alberto Musalem said Monday night he too thinks it will likely be appropriate to lower rates over time toward neutral.