(Bloomberg) -- Federal Reserve Bank of Boston President Susan Collins said she favors fewer rate cuts in 2025 than she had anticipated just a few months ago, following strong employment data and lingering inflation.
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Collins, who emphasized the need for patience, said her outlook for interest rates was consistent with the median projection from officials released after the Fed’s December meeting. That pointed to two quarter-point reductions this year, down from four in September forecasts.
“Over time, it will be appropriate for some more easing, but perhaps somewhat less than I might have thought back in September,” Collins said Wednesday in an interview with Bloomberg News. “Taking the time to really patiently assess the data holistically — to be analytic and patient — seems to me very likely to be appropriate as we think about policy going into 2025.”
US central bankers lowered interest rates for the third straight meeting in December, bringing their benchmark rate to a target range of 4.25% to 4.5%. Fed Chair Jerome Powell said after the meeting that officials will be watching for further progress on inflation when considering future rate adjustments.
The Boston Fed chief, who will vote on this year’s policy decisions, said rates are still restrictive but closer to so-called neutral after the central bank lowered borrowing costs by a full percentage point since September. The neutral rate refers to the interest-rate setting that neither boosts nor slows the economy.
Investors widely expect policymakers to hold rates steady when they gather in Washington Jan. 28-29, according to pricing in futures contracts.
Bumpy Inflation
Collins said she still expected inflation to decline, though upside risks have increased and progress would likely be “bumpy” and “uneven.”
“My baseline outlook is that inflation will continue to come down, perhaps more gradually than I had thought,” Collins said.
Good news on the inflation front, she said, would support the case for easing sooner. But if the data are less clear, officials may want to wait longer. Indeed, uncertainty about fiscal policies under the incoming Trump administration are making it more challenging to forecast how the economy and inflation will evolve, Collins said.
“There’s a lot of uncertainty related to what policy changes might arise with the new administration,” she said. “I don’t think that we have enough information to really factor in how to think about that.”