Fed’s Collins Says No Rate Cut In 2025 Is A Possibility, Points To Rising Uncertainty Due To Trump’s Tariff War

Boston Federal Reserve President Susan Collins is getting more skeptical about the significance of interest rate cuts in 2025.

In an interview with Barron’s, Collins said her latest outlook points to stagflation, which means she anticipates higher inflation and slower economic growth.

The Fed official also expressed less confidence in the projections she will submit for the June Fed policy meeting.

Trump’s tariff war is partially responsible for the decline in Collins’ confidence. She said that while tariffs have had a limited impact so far, that could change.

“We’re seeing some signals and certainly the conversations that I’m having with different stakeholders across a range of sectors, point to an expectation of needing to pass through some of the increases in cost to consumers,” she said.

She said there is a high degree of uncertainty about Trump’s tariffs, and given their evolving nature, Federal Reserve Chair Jerome Powell’s wait-and-watch approach is appropriate for the time being.

Collins also said that the Fed could announce no cuts in 2025.

Waller’s Not As Pessimistic

On the contrary, Federal Reserve Governor Christopher Waller is not as pessimistic about rate cuts as Collins.

He pointed out that the path to rate cuts in 2025 is still visible, but added that whether we see any rate cuts hinges on how President Trump shapes his tariff war.

"If we can get the tariffs down close to the 10% and then that's all sealed, done and delivered somewhere by July, then we're in good shape for the second half of the year,” Waller said.

The Fed’s key interest rate is in the 4.25% to 4.50% range.

Meanwhile, the SPDR S&P 500 ETF (SPY), which represents the S&P 500 index, was down 1.46% at the time of writing as President Trump issued a 50% tariff threat to the European Union.

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Also See: Morgan Stanley Maintains S&P 500 Target For 2025 Despite Trump Tariff Shock