Boston Fed President Susan Collins Talks Market and Rates

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Welcome to all of our Bloomberg TV viewers and Bloomberg Radio listeners around the world. I'm Michael McKee, the international economics and Policy correspondent for Bloomberg, and we are at the Boston Federal Reserve Bank today. They're holding their sixty eighth Annual Economics Conference, and we're joined by the President of the Boston Fed, Susan Collins. Thank you very much for being with us today.

It's delighted to be here. Thanks for being at the Boston Fed.

It's great.

We tell everybody. It's a beautiful day. But it's thirty nine degrees so winter is finally hit here.

The seasons are wonderful.

So speaking of winter, December eighteenth, you have another FED meeting, and at this point there seem to be some questions about whether or not the Fed will be cutting rates again, because this week we got some firm inflation news. Retail sales were okay but not particularly strong. At this point, are you thinking that we should see a cut or is it better to pause and wait?

So I think it's important to say there's no preset path. I do see rates as still in the restrictive range, which means that over time, some amount of easing.

Will be appropriate.

But you know, the economy is in a very good place right now, and inflation's coming back down to target. The labor markets are healthy, we're seeing solid growth. The goal of policies really to sustain that healthy set of conditions, recognizing, you know, there are risks on both sides, and so

Well, the data this week showed inflation a little bit stronger than it had been in the CPI and the PPI, and those who do the nerdy calculations for the PCE say, we're going to see the same thing. Should you keep your foot on the brake a little more then, because inflation is not back down to your target.

So you know, I don't focus too much on any one data point. I think it's really important to look holistically. And when I do that, what I see is that, first of all, inflation has come down significantly. I focus on the you know, a couple of month averages, and if you take food, energy, and in particular shelter out, the rest of inflation has actually been in the range consistent with the two percent, exactly what we'd like to see.

What's really still elevated as.

Shelter and that is taking time to come back down, and a lot of that really reflects shocks from the past. I'm not seeing evidence of new price pressures, and so I think it's important to stay the course.

But that.

Analogs of the data is part of why I thought it was really appropriate for us to begin easing in September and to be in an environment where we are really looking over time methodically, perhaps patiently, to be normalizing policy to maintain those healthy conditions that I talked about a moment ago.

Well, let's look at the other side of the mandate. Employment. We had a very strong employment report, and then we had a very weak employment report, granted affected by hurricanes and strikes. So what's your judgment of where the labor market is when you look holistically at all of the labor data.

So again, when I look at all of the data, and you're absolutely right, there have been some stronger readings, there have been some readings over time that were a bit.

Weaker, and there are a lot of special factors.

So looking at averages over time, looking at the range of information, what I see is a labor market that looks similar to condition that we've considered full employment, so in terms of job openings and quit rates, and the fact that wage growth has been coming down and given the high productivity we've seen is consistent with the move

All right, healthy labor market. Inflation's coming down, even if it's stalled a little bit, but it's in the twos and the economy is stronger than people had forecasts. So do you agree with Chairman Powell and saying there is nothing telling you to rate you have to cut rates very quickly.

So I think that I agree that I don't see a big urgency. At the same time, I do think that preserving those healthy conditions, right, I mean, that's what our mandate really is from Congress.

Price stability and maximum.

Employment sustained over time, not just at some point in time. And so as I said before, I do see financial the policy stances being in a restrictive place and over time, normalizing that I think is going to be important. But we're well positioned to be really careful in assessing the data and making decisions about the pace, about the timing, and so that you know that's how I think about that.

Let me ask about the elephant in the room, and that is the new president elect of the United States. His policies have not been fleshed out. Tremen Pole's made it clear you don't know exactly what's going to happen, but do you expect that something in whatever his fiscal plans are will affect the economy, and you will have to take another look, say at what your economic projections are and what the plot projections are for twenty twenty five.

Now, as we get information about the economy, certainly that includes.

About fiscal policy.

Of course, it's really important to factor that in and there are lots of things we look at. Fiscal policies certainly one of them, but I don't want to speculate on what policies that haven't been enacted or implemented might look like.

Well, do you think that the tariffs as an economic concept add to inflation?

They can, And again we would have to see if there are tariffs that are implemented, more about the specifics and the dynamics for those.

Now, if there's a fiscal impulse in whatever the President elect chooses to do, is the economy growing too fast for that right now? Would that be a danger or worry?

So again, I think there are lots of things that determine how the economy evolves and grows over time. Fiscal policy is certainly one of them, and certainly does have an impact on that, and we'd have to factor that in and look through that. You know, I do think and Chair Powell has has also said this that you know, fiscal policy at the moment is on a path that's

As far as I know, President like Trump has never threatened to fire you. But I wanted to ask what is in your mind the relationship between the Federal Reserve and the executive branch.

So what I would say is that the FED is structured by Congress as an independent body, and that that is important in terms of the ability.

For us to do our job well.

There's a lot of analysis that shows that independent central banks are more effective at keeping inflation low and stable. And we have really seen how important it is to keep inflation low and stable in terms of the impact the higher prices past inflation have had. And so you know, I think that is a very good structure to enable us to do our jobs well.

So the things that come across social media basically just noise in the background to you.

As a policymaker, I am very focused on doing my job and there is more than enough to keep me very focused and very busy.

Now, the people, well you can't see if I could see them out there, all the traders on their knees going tell us when you're going to do this sort

All things I think always evolve, and so in about a month or so we will have a new SEP and information from all of the policymakers about what they think. And so I think it's always true that you know, in the middle of the SEP information you don't want to take too much from what might have been written down, penciled in. I would say a number of weeks earlier, a lot of the data evolves.

What are the people who in these tall buildings around us, all the corporate leaders in your district telling you about how they see the economy going forward and their plans.

Yeah, and I appreciate you asking about that. I think one of the really important things that I do that my colleagues do is talk to people across the economy in lots of different sectors. So being out and about throughout New England, and what I'm hearing is pretty consistent with what I said at the outset that people are

So that's all very consistent.

But of course, you know, the aggregate data masks a range of different specifics across individual firms and sectors and regions, and it's really I think helpful to hear all of that and pull the qualitative information together with the statistics.

Well, last question at your conference, it's on financial technology this year, and the Boston Fed's been in the middle of financial technology and just coincidentally, coming up at the top of the hour, we have our Bloomberg technolog Show. So let me ask you. A lot of tech talk over the last five, six, seven years has been tech talk. How fast are we going to see some sort of

So, you know, the impacts of technology have many, many dimensions, and I think we're already seeing some impacts in terms of the roles at fintech are playing across our economy in different ways. And the conference today and tomorrow is intended to really bring experts together who have knowledge and have done analysis from different vantage points to see, as we put together the things we know, what are some of the things we don't know and need to know better.

Well, thank you for having us. Susan Collins, the President of the Federal Reserve Bank of Boston,