Fed's Collins: Recent data 'reduces the urgency to ease'

By Greg Robb

Fewer interest rate cuts this year than had been expected may be warranted, Boston Fed president says

Recent labor market and inflation data highlight the need for the U.S. central bank to be patient about monetary policy, and has reduced the "urgency" to cut interest rates, Boston Federal Reserve President Susan Collins said Thursday.

"Overall, the recent data have not materially changed my outlook, but they do highlight uncertainties related to timing, and the need for patience," Collins said, in a speech to the Economic Club of New York.

"This also implies that less easing of policy this year than previously thought may be warranted," she added.

The Boston Fed president said It may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to the 2% target.

She said she was now less worried that interest rates were too tight.

"Less concern about labor market fragilities, combined with the possibility that policy is only modestly restrictive, also reduces the urgency to ease," she said.

See also: Fed's Williams sees inflation falling 'closer to' 2% target by next year, despite recent 'bumps'

Collins said she still expects inflation will move down towards the 2% target and that it will be appropriate to lower rates this year. She had indicated in February that three quarter-point cuts this year would be appropriate.

Collins said that slower demand was needed to bring inflation down.

The fact that economic growth continuing to show resilience was good news but also "raises questions about the extent to which the stance of monetary policy is actually restraining demand," she said.

Strong demand could explain the increase in inflation so far this year, she added.

At the moment, the Fed's current stance of policy was "well positioned," Collins said.

See also: Fed officials back cautious approach to further shrinking of its balance sheet, minutes show

-Greg Robb

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04-11-24 1201ET

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