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Is modest economic slowdown in the US possible?

Susan Collins, the new president of the Federal Reserve Bank of Boston, said Monday that a higher unemployment rate will be needed to bring down inflation from unusually high levels, but also suggested any economic downturn would likely be modest.

In her first speech as Boston Fed president, Collins said the economy is resilient enough to withstand the higher interest rates needed to combat inflation, which is near a four-decade high. Her comments echoed similar remarks from Raphael Bostic, president of the Atlanta Fed, on Sunday. Fed Chair Jerome Powell has also said that fighting inflation would cause “pain” for households and businesses.

“Accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate,” Collins said in a speech to the Greater Boston Chamber of Commerce.

Collins acknowledged that job losses are painful and said “there is apprehension about the possibility of a significant downturn.” Yet she maintained that “the goal of a more modest slowdown, while challenging, is achievable.”

Her comments added to an ongoing debate about how badly the Federal Reserve’s ongoing interest rate increases will hurt the economy. By lifting its benchmark rate, the Fed is pushing up the cost of a wide range of consumer and business loans, including for mortgages, auto loans, and credit cards.

Fed officials hope those increases will achieve a “soft landing” by slowing consumer and business spending enough to bring down inflation but not so much as to cause a recession.

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