Fed’s Collins: December rate cut was a close call

Investing.com -- Federal Reserve Bank of Boston President Susan Collins said she supported last week’s interest rate reduction, but described the decision as a "close call" due to ongoing concerns about elevated inflation.

In a LinkedIn post on Monday, Collins explained that while she had leaned toward maintaining rates in November, by the December meeting "available information suggested the balance of risks had shifted a bit."

Collins noted that "scenarios with a notable further rise in inflation seem somewhat less likely," citing three key factors: declining longer-term inflation expectations, recent trade-policy changes suggesting lower effective tariff rates, and a softening labor market.

Despite these shifts, the Boston Fed chief expressed continued vigilance, stating "with nearly five years of elevated inflation, I remain concerned about potential inflation persistence."

Collins, who has voting rights on the Federal Open Market Committee in 2025, supported all three rate reductions this year. She emphasized the importance of the recent post-meeting statement including language that was used in December 2024, which preceded a pause in rate cuts.

According to Collins, Fed officials need greater clarity on inflation’s trajectory before implementing further interest rate reductions.

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