The bar for cutting rates further is ‘relatively high,’ sees holding for ‘some time’

Boston Fed president Susan Collins said Wednesday that while she supported cutting interest rates at the last policy meeting, the bar for cutting rates further is “relatively high” and she sees holding rates at current levels for “some time.”

“It will likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment,” Collins said in a speech in Boston. “I see several reasons to have a relatively high bar for additional easing in the near term.”

In her first comments since the Fed’s policy meeting on Oct. 29, Collins cautioned that providing additional support to the economy through lower rates runs the risk of slowing — or possibly even stalling — inflation coming back down to the Fed’s 2% target. She further stressed that demand in the economy is “resilient demand,” and while unemployment risks moving higher, she doesn’t think the job market has deteriorated further since the summer.

Without a “notable deterioration” in the job market, Collins said she would be “hesitant” to cut rates further, especially given the limited information on inflation due to the government shutdown. She said that until the Fed can assess the impact of the rate cuts since September, she thinks it would be prudent to make sure inflation is sustainably moving back toward 2% before making any further adjustments to rates.

Collins joins the growing chorus of Fed officials who have become more cautious on whether to cut rates at the next meeting in December.

Atlanta Fed president Raphael Bostic said Wednesday that while it’s an “extremely close call,” he believes inflation is a more “urgent risk” than the job market right now.

Read more: How jobs, inflation, and the Fed are all related

Bostic said he sees little to suggest that price pressures will dissipate before mid- to late 2026, at the earliest.

“We cannot breezily assume inflationary pressures will quickly dissipate after a one-time bump in prices from new import duties,” Bostic said in a speech in Atlanta. “Across all our information sources, I see little to no evidence that we should be sanguine about the forward trajectory of inflation.”

Chicago Fed president Austan Goolsbee, like Collins, told Yahoo Finance last week that the bar for cutting rates is higher since the Fed has cut rates twice — a projection he had penciled in for the year — and given that inflation has remained above the target for 4.5 years and is trending the wrong way.

Collins also said inflation remains elevated and noted that the Fed’s preferred inflation gauge for August showed an increase in prices driven by rising goods prices — largely due to tariffs — that has more than offset the gradual decline in housing price inflation.