Fed’s Collins Says December Rate Cut Still on the Table

(Bloomberg) -- Federal Reserve Bank of Boston President Susan Collins said a December interest-rate cut remains on the table, emphasizing the central bank’s decision will be guided by incoming data.

“I do see the policy stance as being in a restrictive place, and over time normalizing that, I think, is going to be important,” Collins said Friday in an interview on Bloomberg Television. “We’re well-positioned to be really careful in assessing the data and making decisions about the pace, about the timing.”

The Boston Fed chief noted inflation has come down “significantly,” adding she’s not seeing new price pressures and that “it’s important to stay the course.”

Several Fed officials this week have signaled a preference to lower borrowing costs at a gradual pace. Chair Jerome Powell said Thursday that the economy is strong and not sending signals that policymakers need to reduce interest rates in a hurry.

Collins said the economy is in a “very good place.” Labor market conditions are generally in line with full employment, she said, and inflation is on track to the central bank’s 2% goal.

Data out earlier Friday showed US retail sales advanced in October, boosted by autos. Furthermore, significant upward revisions to the prior month’s data suggest consumers entered the final months of the year with strong momentum.

With inflation having considerably cooled, officials have said they are comfortable lowering rates from a level they view as restraining the economy. Still, they have noted the potential risk of moving too fast and reigniting price pressures.

With regard to the potential impact of President-elect Donald Trump’s economic proposals, including the prospect of levying new tariffs on US trading partners, Collins said she didn’t want to speculate on policies not yet enacted.

Amid the recent chorus of Fed officials advocating for a careful approach to rate cuts and firmer-than-hoped inflation data, traders have pared back their bets officials will again lower rates at their next meeting Dec. 17-18.

Fed officials will offer some clues on their outlook for the policy path in 2025 and beyond when they issue fresh economic projections following their meeting next month. At their September meeting, officials penciled in a full percentage point of cuts next year, suggesting four quarter-point reductions, according to the median projection.