Federal Reserve Bank of Boston President Susan Collins stated on Wednesday that in order to bring inflation back to the central bank’s 2% target, there needs to be a slowdown in the U.S. economy. She emphasized the importance of aligning demand with supply to ensure sustainable inflation levels. Collins made these remarks at an event at the Massachusetts Institute of Technology.
Regarding monetary policy, Collins highlighted the need to maintain current policy levels until there is greater confidence that inflation is moving towards 2%. This comes after the last Federal Open Market Committee meeting where officials opted to keep the target rate range at 5.25% to 5.5%. Inflation pressures have been persisting, leading to uncertainty around the timing of potential interest rate cuts.
Collins remains optimistic that the Fed can achieve the 2% target within a reasonable timeframe, especially with a healthy labor market. However, she acknowledged that reaching this goal may take longer than initially anticipated. She emphasized that policy decisions will be made based on a thorough evaluation of various data points.
The Fed president also mentioned that longer-run inflation expectations are aligned with the 2% goal and that the recent rise in productivity may not be a lasting trend. Additionally, she noted that employers are likely able to accommodate higher wage demands. Collins stressed the importance of adapting policy based on a comprehensive assessment of economic conditions.