(Bloomberg) -- Federal Reserve Bank of Boston President Susan Collins said the US central bank is unlikely to react to the impact of tariffs on prices so long as officials don’t see signals of higher, persistent inflation.
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“If expectations remain well-anchored, the Federal Reserve would try to look through” the rise in prices driven by tariffs, Collins said Monday in an interview with CNBC.
President Donald Trump on Saturday announced tariffs on imports from Mexico, Canada and China, top US trading partners, and has threatened to impose levies on other economies, including the European Union. The White House, however, subsequently said a temporary deal had been struck to delay the imposition of tariffs against Mexico.
Stock markets around the world fell on the tariff news before paring those losses after the Mexico announcement. Currencies depreciated against the dollar amid concern the tariffs would slow growth and drive up prices, keeping interest rates higher.
The Trump announcements add pressure to central bank officials to begin signaling how they might respond to tariffs that could add to inflationary pressures, but might also hurt demand and growth — outcomes that could pull the Fed in opposite directions.
Collins said that while broad-based tariffs, like the ones announced over the past few days, would likely impact prices, it’s difficult to be precise in forecasting the size of the effect given that exact policies are still being hammered out.
Collins repeated her view that policymakers should continue to be patient, especially amid a labor market that she described as “near full employment.”
“There’s no urgency for making additional adjustments,” she said. “The data is going to have to tell us. At some point I certainly would see additional normalization in terms of what the policy stance is,” she said, referring to potential additional rate cuts.
Several other policymakers have so far said they have time to wait for the roll out of actual Trump policies — not only on trade but also immigration, regulation and taxation — before deciding how to react. In December, the median estimate of the Fed’s 19 policymakers pointed to two interest-rate reductions this year.
Fed officials held interest rates steady at their Jan. 28-29 meeting after cutting them three consecutive times in late 2024.