Federal Reserve's Collins: The economy is stable but needs further easing, a rate cut in December may be expected

According to the Zhitong Finance APP, Susan Collins, President of the Federal Reserve Bank of Boston, delivered a speech at an event at the Gerald R. Ford School of Public Policy at the University of Michigan, emphasizing that despite the overall good economic conditions and inflation expected to return to the Federal Reserve's 2% target, further interest rate cuts are still needed. However, policymakers must remain cautious to avoid acting too quickly or too slowly. She pointed out that while the ultimate outcome remains uncertain, current policies are still restrictive, and the Federal Open Market Committee is prepared to address inflation and employment risks, with interest rates not following a preset path. Collins stated that a further slowdown in economic hiring is undesirable, and a rate cut in December is still possible, but specific decisions will depend on subsequent data. Policymakers will submit their latest interest rate and economic forecasts at the meeting on December 17-18 next month.

In her speech, Collins mentioned that although the overall economic performance is good, progress on inflation may be uneven, and strong demand could exert upward pressure on prices. At the same time, the labor market is healthy, but job growth is slowing and is more concentrated in a few sectors. She emphasized that policymakers need to be cautious regarding interest rate cuts, as it is uncertain how much borrowing costs can ultimately be reduced. She noted that the policy adjustments made so far have allowed the Federal Open Market Committee to take the time to comprehensively assess the impact of existing data on the outlook and the balance of related risks.

Additionally, Collins stated that after the Federal Reserve officials cut rates by 50 basis points in September, they lowered rates by another 25 basis points this month. Several policymakers tend to adopt a cautious approach to further rate adjustments. It is reported that she mentioned last week that inflation is "strongly rebounding," close to 2%, but inflation data may fluctuate month by month.

It is worth mentioning that before joining the Boston Fed, Collins worked at the University of Michigan for 15 years, including ten years as the dean of the Ford School. This speech also reflects her deep understanding of the current economic situation and her cautious attitude towards policymaking.

Coincidentally, Fed Governor Cook recently stated that she is closely monitoring further signs of weakness in the U.S. labor market while observing whether inflation continues to fluctuate on the path to the central bank's 2% annual target. Cook expects further rate cuts may occur in the future, but she emphasized that no decisions will be made prematurely.

In her speech at the University of Virginia, Cook stated, "I still believe the direction of the policy interest rate path is downward, but the magnitude and timing of rate cuts will depend on the latest data, the evolving outlook, and the balance of risks. I do not believe the policy is on a preset track, and I am ready to respond to changes in the outlook at any time."

She added that if the process of inflation slowing down stops, the Federal Reserve may pause rate cuts; if there is greater weakness in the labor market, more rapid easing of policy may be needed. In the case of a balance between the two, Cook expects interest rates to gradually decline to a neutral level, which neither stimulates nor suppresses economic activity