Federal Reserve Bank of Boston President Susan Collins believes that the U.S. economy needs to slow down in order to bring inflation back to the central bank’s 2% target. In remarks given at a Massachusetts Institute of Technology event, Collins emphasized the importance of aligning supply with demand for sustainable inflation.
After the recent Federal Open Market Committee meeting, Collins stated that the unexpectedly high levels of activity and inflation suggest that monetary policy should remain steady until there is greater confidence in reaching the 2% inflation goal. The Fed has been grappling with inflation pressures that have been more steadfast than anticipated this year, leading to uncertainty about the timing of any potential interest rate cuts.
Collins expressed optimism that the Fed can achieve its inflation target in a reasonable amount of time, particularly with a healthy labor market. However, she cautioned that achieving the 2% goal will take longer than anticipated and emphasized the need for policy decisions based on a thorough assessment of evolving economic conditions.
Collins also noted that longer-run inflation expectations are in line with the Fed’s target and dismissed the recent increase in productivity as a lasting trend. She believes that employers are capable of accommodating higher wage demands. Ultimately, Collins emphasized the importance of a measured and holistic approach to monetary policy decisions.