^{Photo: The Boston Globe}

A Cautious Approach from the Boston Fed

Boston Federal Reserve President Susan Collins has made it clear that she’s in no rush to support additional rate cuts, citing persistent inflation pressures and limited economic data due to the ongoing government shutdown. Speaking to business leaders in her district, Collins emphasized that “it will likely be appropriate to keep policy rates at the current level for some time” to ensure a balanced approach to inflation and employment.

Her stance comes as the Federal Open Market Committee (FOMC) remains divided on the path forward. Collins, a voting member this year, represents the more cautious, or “hawkish,” wing of the committee. Her comments suggest growing resistance among Fed officials to the idea of further monetary easing before clear signs emerge that inflation is firmly moving toward the central bank’s 2% target.

The Balancing Act Between Inflation and Jobs

While Collins acknowledged that the U.S. labor market has softened slightly, she noted that overall demand remains strong, reducing the urgency for additional stimulus. “Providing further monetary support to economic activity runs the risk of slowing—or possibly stalling—the return of inflation to target,” she said.

The most recent data shows inflation hovering around 2.9%, still above the Fed’s goal, while unemployment has crept up to 4.2%. Despite these mixed signals, Collins stressed that maintaining policy discipline is key. “Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further,” she remarked.

Her message reflects a broader concern within the Fed that cutting too soon could reignite price pressures, especially as wage growth remains steady and consumer spending continues to defy expectations.

Data Gaps and Decision-Making Challenges

The ongoing government shutdown has added another layer of complexity for policymakers. With major economic reports—such as those on inflation, consumer spending, and job creation—potentially delayed or incomplete, the Fed is facing unprecedented uncertainty.

White House officials confirmed that October’s inflation and employment reports might not be released on schedule, leaving the FOMC without critical data ahead of its next meeting. Collins highlighted this issue, saying that a “lack of timely information” increases the risks of making premature or misinformed policy moves.

Divided Voices Inside the Fed

The October FOMC meeting ended with a 10-2 vote in favor of a quarter-point cut, reducing the federal funds rate to a range of 4.75% to 5.00%. Governor Stephen Miran dissented, pushing for a deeper reduction, while Kansas City Fed President Jeffrey Schmid opposed any cut at all.

Collins supported the October cut but indicated that additional easing could jeopardize the Fed’s credibility in fighting inflation. Her caution mirrors statements from Fed Chair Jerome Powell, who in October hinted that the December meeting’s outcome remains uncertain despite market expectations of another cut.

What It Means for Markets and Borrowers

Collins’s comments signal to investors and businesses that rate cuts are far from guaranteed in the coming months. With inflation still above target and growth showing resilience, the Fed may lean toward maintaining current policy levels well into early 2025.

For households, this could mean that mortgage rates, credit card APRs, and other borrowing costs remain elevated. For markets, the message is clear: the path to lower interest rates will likely be slower and more cautious than investors hoped.

As Collins summed up, the Fed must tread carefully: “The risks of moving too fast outweigh the benefits of short-term easing. Our focus remains on ensuring inflation sustainably returns to our 2% goal while supporting a healthy labor market.”