Boston Federal Reserve President Susan Collins delivered a speech advocating for a cautious approach to policymaking and expressed her need for further evidence to confirm the containment of inflation. She echoed sentiments shared by other central bankers, suggesting that the Federal Reserve might be nearing or already at the peak for interest rates. However, she emphasized that the need for additional rate increases would depend on future data. Collins emphasized the importance of proceeding cautiously in an uncertain economic environment, recognizing risks, and remaining data-dependent while maintaining flexibility to adjust policies as conditions warrant. Her stance aligned with recent statements from Fed Chair Jerome Powell and Governor Christopher Waller, who also favored a patient approach while closely monitoring positive developments in inflation and being prepared to implement further rate hikes if necessary.

Collins acknowledged some positive aspects of inflation, citing that the Fed’s preferred inflation gauge only rose by 0.2% in July, and wage growth slowed. However, she cautioned that interpreting these signals amid data noise is challenging, and if improvements prove to be temporary, additional tightening might be required. She pointed out that despite promising developments, it is premature to conclude that inflation is on a sustained path back to the target of 2%. Collins, a nonvoting member of the rate-setting Federal Open Market Committee for the year, emphasized the importance of recognizing the time lags associated with the impact of Fed policies, suggesting that COVID-related factors and strong household and corporate balance sheets could prolong these lags, necessitating caution in policy adjustments. Collins aims to achieve an orderly economic slowdown that aligns demand with supply, ensuring sustainable inflation targeting. Market pricing indicates a low likelihood of a rate hike at the upcoming September 19-20 policy meeting, but there is a closer call for the October 31-November 1 meeting, with a 43% probability of a rate increase, according to CME Group data. Collins’s stance reflects the cautious sentiment among central bankers navigating economic uncertainties.