The Importance of a Patient, Methodical, and Holistic Approach to Monetary Policy

By Susan M. Collins

April 11, 2024

New York, New York

Remarks to the Economic Club of New York

Full-text Speech (pdf)

Takeaways from Boston Fed President Susan M. Collins’ April 11, 2024 Remarks

Collins expects inflation to return to 2% while the job market stays strong.
Collins is committed to returning inflation to the Fed’s 2% target and expects this process to unfold over time, with the labor market remaining healthy. She notes that risks to the economy are two-sided (risks from cutting rates prematurely, as well as from waiting too long).
Collins continues to expect it will be appropriate to begin easing policy later this year, but more time is needed to gather information instilling greater confidence that progress will continue.
Policy decisions must be based on holistic data assessment, and the risks and uncertainties remain elevated. It may take longer to discern whether the economy is sustainably on a path back to 2% inflation, and thus less easing of policy this year than previously thought may be warranted. Monetary policy is currently well positioned for the requisite patient, methodical approach, and to manage the risks.
Supply improvements have so far played a key role in rebalancing the post-pandemic economy.
Improved supply chains, increased productivity, and growth in labor supply have resulted in better-than-anticipated outcomes in 2023. But we cannot count on these improvements to continue at the same pace, and demand growth will need to moderate to achieve further progress on inflation.
The lower risk that conditions are overly tight supports taking a more patient approach to deciding when to ease.
Economic activity has remained robust despite high interest rates. While this resilience is good news, it raises questions about the restrictiveness of the policy stance and broader financial conditions. In this context and with less sign of labor market fragility, Collins believes there are now fewer concerns about policy remaining too restrictive in the near-term.
Recent data haven’t changed the outlook, but suggest patience rather than urgency.
Data highlight the likelihood that disinflation will continue to be uneven. We should not be surprised by some higher inflation readings after the low numbers in the second half of 2023. While expecting all indicators to be well aligned is too high a bar, further signs of progress towards the 2% inflation target will be necessary.