Boston Fed's Collins Backs 'Modestly Restrictive' Policy Stance, Supports Rate Cut Later This Year If Data Backs It Up

Federal Reserve Bank of Boston President Susan Collins stated on Tuesday that while she supported the recent 25-basis-point interest rate cut, future rate cuts hinge on what the inflation data show.

Speaking at a Council on Foreign Relations event in New York, Collins said she supports a “modestly restrictive” monetary policy stance, which policymakers are using to bring down inflation while limiting the risks of further weakening in the labor market.

“Still, with less scope for inflationary pressures from the labor market, the upside inflation risks I was concerned about a few months ago are more limited. In this context, it may be appropriate to ease the policy rate a bit further this year – but the data will have to show that,” she added.

Collins also stated that the current labor market weakness is due to the heightened uncertainty, resulting in anemic job gains. She said that this is “somewhat puzzling” amid healthy economic growth. “A continued productivity-enhancing mindset, which is ubiquitous in my discussions with CEOs across New England, may now be tempering hiring despite solid economic growth,” she added.

However, Collins expressed optimism that hiring will gather steam once firms adjust to President Donald Trump’s tariff policies. As for inflation, she said that while it is “likely to remain elevated into next year, I expect it to resume its gradual return to target over the medium term.”

Data from the CME FedWatch tool indicates a 92.5% probability of a 25-basis-point rate cut in October.

Last week, Federal Reserve Chair Jerome Powell stated that the central bank’s current monetary policy provides it with the necessary room to respond to economic developments and adjust the policy as needed. This was after the Federal Open Market Committee (FOMC) cut the key borrowing rate by 25 basis points, bringing down the federal funds rate to the 4% to 4.25% range.

Meanwhile, U.S. equities declined in Tuesday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.08%, while the Invesco QQQ Trust (QQQ) fell 0.18%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.2% at the time of writing.

Also See: UiPath Stock Jumps 23% After Company Announces Partnerships With Nvidia, OpenAI, Google, And Snowflake On Agentic Automation

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