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Highlights
- Susan Collins says strong economy supports patience before any Fed rate cut decision.
- Fed Chair Jerome Powell and Fed president Beth Hammack also support a wait-and-see approach.
- New Boston Fed tool helps track inflation impact of rising U.S. border tariffs.
Federal Reserve Bank of Boston President Susan Collins has said the U.S. economy remains strong enough to delay Fed rate cut decisions. The Fed president echoed similar sentiments shared by Fed Chair Jerome Powell and Fed President Beth Hammack on a wait-and-see approach towards quantitative easing (QE).
Collins Says Strong Economy Allows Delay in Fed Rate Cut
The Fed president stated that the U.S. economy is strong during a speech on Tuesday at a Washington event hosted by business economists (the NABE Foundation’s 22nd Annual Economic Measurement Seminar).
As such, Collins believes that the U.S. Central Bank can continue to closely monitor inflation data before deciding on any Fed rate cut or policy change. According to her, the current economic strength gives officials time to assess new developments carefully. One of those developments is the ongoing impact of tariffs.
Collins acknowledged that tariffs are starting to affect the prices of some goods. However, she said the damage may be less than expected. The Fed official explained that some companies are choosing to accept smaller profit margins instead of passing costs to consumers.
Meanwhile, American households are still spending even as prices rise. That spending strength is helping reduce the negative effects of tariffs on the broader economy, which in turn lowers the urgency for a Fed rate cut.
She also noted that recent inflation data shows a mixed picture. June’s consumer price report showed inflation rising more slowly than economists expected. But Collins warned that price pressures from tariffs are still building in some areas. Her message aligns with the cautious stance taken by Cleveland Fed President Hammack, who also argues that inflation is still too high to justify a Fed rate cut.
Cut Depends on Clearer Inflation Data
To help understand these changes, the Boston Fed developed a new tool. This tool measures how price increases at the U.S. border are passed on to consumers. Collins said this work will help the Fed track how tariffs affect inflation more accurately before deciding on any Fed rate cut.
Looking ahead, she predicted that the Fed’s preferred inflation gauge, Personal Consumption Expenditures (PCE), may rise to around 3% by the end of the year. In May, that measure stood at 2.7%. After peaking, Collins believes inflation will start to fall again, potentially clearing the way for a future Fed rate cut.
Fed officials have held interest rates steady in 2025 while monitoring inflation and growth. Collins said this approach remains the right one given current conditions and said the timing of any Fed rate cut should be based on clearer evidence.
Meanwhile, Bitcoin price dropped after the release of June’s CPI data. At 2.7% year-over-year, the data was slightly higher than expert estimates, reinforcing expectations that a Fed rate cut may not happen soon.
The PPI data is the inflation gauge in focus following today’s release of the June CPI data. The figures coming in higher than expectations would further dampen hopes about an interest rate cut.
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