Boston Fed President: "Supported Rate Cut, but It Was a Precarious Decision... Inflation Concerns Remain"

"Balance of risks has shifted somewhat"
Concerns persist over prolonged inflation despite lower likelihood of a sharp surge

Susan Collins, President of the Federal Reserve Bank of Boston, stated on December 15 (local time) that while she supported last week's interest rate cut by the Federal Reserve (Fed), the decision was a "precarious judgment" given the persistently high inflation levels.

Susan Collins, President of the Federal Reserve Bank of Boston. Bloomberg.

In a post on the social networking service LinkedIn that day, President Collins said, "In November, my analysis leaned toward holding policy steady, but by the December meeting, new information suggested that the balance of risks had shifted somewhat."

She explained, "The likelihood of a scenario where inflation rises significantly further now appears somewhat lower," adding, "This reflects the decline in long-term inflation expectations, the reduction in effective tariff rates due to recent changes in trade policy, and the easing of labor market conditions."

President Collins supported all three consecutive 0.25 percentage point interest rate cuts in September, October, and December this year. Ahead of this month's meeting, there was speculation that her previous hawkish comments might lead her to advocate for a rate hold, but she once again supported the decision to cut rates.

However, she also noted that concerns about inflation remain significant.

President Collins said, "High inflation has persisted for nearly five years," and added, "I am still concerned about the possibility that inflation could remain elevated for an extended period." She emphasized that members of the Federal Open Market Committee (FOMC) should have a clearer outlook on the trajectory of inflation before considering additional rate cuts in the future.

President Collins will not have a voting right on interest rate decisions at the FOMC next year.