1. As we begin the new year, “the economy is in a good place overall.”
   “Inflation is down significantly from its 2022 peak,” and data continue to point to a gradual, if uneven, trajectory back to the Fed’s 2 percent target. This has been accomplished with a labor market that has stayed healthy “as unsustainably hot job-market conditions from two years ago cooled in an orderly way.”
2. By describing the economy as in a good place overall, Collins is not declaring victory – and in fact sees “considerable uncertainty accompanying my baseline outlook.”
   “While inflation is down significantly, it is still above target; and its decline has been slower and bumpier” than anticipated. Collins described multiple types of uncertainty – including “noisy” measurement of key economic variables, unusual features of the post-pandemic economy, and possible future policy changes and geopolitical developments.
3. Reflecting on 2024, Collins notes three takeaways that influence her thinking about 2025.
   The first involves the importance of supply factors, which have been critical in economic developments since 2020 (including supply-chain disruption and then normalization, favorable labor-supply developments, and growing productivity). The second takeaway involves unusual features of the economy persisting post-pandemic. These include the longer-than-expected cushion from strong household and firm finances, which “potentially lengthened the time for higher rates to work their way through the economy,” and the long catch-up process of existing rents to new market rents in keeping shelter inflation elevated. A related and the third takeaway is the importance “of distinguishing potential new price pressures from the dynamics of past shocks.”
4. In achieving both parts of the Fed’s dual mandate from Congress, Collins noted the importance of continued focus on price stability and preserving healthy job market conditions.
   Appropriately restrictive monetary policy has helped to rebalance demand and supply. A cooling labor market was an important reason for beginning to normalize policy, but “my concerns about emerging labor market fragility have decreased more recently, as the unemployment rate stabilized” after rising in the first half of 2024. On the other facet of the Fed’s mandate, although the rate of price increases has moderated notably, high price levels have eroded purchasing power – underlining that “not just restoring, but maintaining, price stability is essential.”
5. Collins said she supported the rate cuts in November and December although “the most recent one was a closer call.” Her current outlook is broadly in line with the median forecast in the December Summary of Economic Projections by participants in the Federal Open Market Committee.
   “On balance, the December cut provided some additional insurance to preserve healthy labor market conditions while maintaining a restrictive policy stance that is still needed to sustainably restore price stability.” Collins expects inflation in 2025 to run somewhat higher than she previously thought, with the risks likely having shifted to the upside.
6. A gradual, patient, and holistic approach to policymaking is appropriate.
   Policy is well positioned to adjust as required to evolving conditions – holding at the current level for longer if there is little further progress on inflation or easing sooner if the need arises, “but there is no preset path.” With the economy in a good place overall but with significant risks and uncertainties, “the appropriate policy strategy is gradualism, anchored by holistic data assessment, careful analysis, and patience” – taking the time to fully assess additional information, not over-reacting to individual data readings, and calibrating policy meeting by meeting.

Tamara Small

All right, good morning everyone. I'm Tamara Small, CEO of NAIOP, Massachusetts. And it is my pleasure to welcome you today. This is an event that has been a long time in the making and we are so thrilled to be with you all today. And it's certainly going to be worth the wait. Before we get begin, I do want to acknowledge that at 10:00 this morning, so right after our discussion ends, we are going to ask everyone to just stay for one national moment of silence in recognition of the death of President Jimmy Carter.

That does happen at 10:00. So if you have to leave, we do ask you to leave a little before ten just to give that that little moment of silence at 10:00. Just giving you a heads up about that. All right, so just a few quick announcements and we'll get started with today's event. It's membership renewal time.

So if you are a member, please make sure you renew your membership. A membership gives you access to discounted tickets. Also, to our participation in our committees that plan events like this. And most importantly, to our advocacy work. That really is our unique differentiator. And it's been an exceptional year. So thank you to all of our members.

If you're not a member, it's also a great time to join today. We have some upcoming events next week. We have an event with the Secretary of Economic Development, Secretary Yvonne Hao as well as Senator Barry Feingold, they'll be reviewing the recently passed economic development legislation. There's a lot in that bill, including many of NAIOP's priorities, such as the Permit Extension Act, which will give permits and in fact, an existence within a two-year window, a two-year extension, a very, very important provision for development projects throughout Massachusetts.

So come to the event will be another, it should be a great discussion. We also have our annual ski day at Loon Mountain. I think we have about five seats left. So if you haven't signed up, do sign up for that on January 31st. And we have a great course, our real estate development fundamentals that'll be happening on February 7th and 14th, a social event at Harpoon on the 12th, and of course a crash course on media training on March 12th.

All are available on our website for registration, so sign up today. We do have some availability for sponsorships to wrap up the year, because we couldn't do what we do without our wonderful annual sponsors. Very special thanks to all the sponsors on our screen today. They make events like this possible. Alright. So let's get started.

We are thrilled to have with us today, Kim Sherman Stamler, President of Related Bill, following opening remarks by Susan Collins, CEO and President of the Federal Reserve Bank of Boston, Kim will moderate what I'm sure will be an insightful discussion. In addition to her day job, Kim also serves on the board of directors of the Federal Reserve Bank of Boston.

She's a trustee of the Dana-Farber Cancer Institute, a vice chair of Better City, and she sits on the boards of the Greater Boston Chamber of Commerce and NAIOP Massachusetts. Thanks Kim for being here. And it's now my distinct honor to introduce Susan M Collins, President and CEO of the Federal Reserve Bank of Boston, one of the 12 regional reserve banks in the Federal Reserve System, the United States central bank in this role, Collins participates on the Federal Open Market Committee, the monetary policy making body of the United States. Since taking office in July of 2022, Collins oversees all of the bank's activities, including economic research and analysis, banking supervision and financial stability efforts, community economic development activities, and a wide range of payments, technology and finance initiatives.

Prior to leading the Boston Fed, Collins was provost and executive vice president of academic affairs at the University of Michigan. She began her career in the Economics Department faculty at Harvard University, and then spent many years dividing her time as a professor at Georgetown University and a senior fellow in economic studies at the Brookings Institution. Collins earned a PhD in economics at the Massachusetts Institute of Technology and a B.A. in economics at Harvard University, summa cum laude.

President Collins, welcome. Thank you for being here.

Susan M. Collins

Thank you. It's just really a pleasure to be here with all of you this morning. And, I have just wanted to start with a couple of thank yous. So, first of all, Tamara, thank you so much for such a gracious, warm introduction, but also for the invitation to join, this important group this morning. I also wanted to thank Kim Sherman Stamler.

And, as you know, of course, she's president of Related Beal and thanking her for being part of the program. But in particular, I wanted to thank her for her role on our board of directors, providing us with just really terrific insights, over a number of years about the industry, financial conditions. It's been really valuable. And so, Kim, thank you for your public service.

And I'd also like to welcome all of you here to the Boston Fed today. Interacting with a wide range of stakeholders in our economy is extremely valuable for me and also members of my team, as I think about policymaking and the other broad range of things that we do here at the Boston Fed. So I make sure to meet and listen to participants in the economy from all industries and backgrounds across all of the states of New England, which is our district.

And so it's just really wonderful to meet with so many leaders in commercial real estate at the session today. So since many of you are involved in development, I thought I'd briefly mention that we here at the Boston Fed consider this place an example of the civic role of buildings and of development vision. And it's really one way that our organization has been able to help contribute to Boston's vibrancy.

So by all accounts and many of you I know, know this much more, than deeply than I may, but the late '60s and early '70s hadn't really been that kind to this part of our city. And so when the Fed outgrew its location on Pearl Street and built on this site, it helped to expand the city's financial district.

And today, this tower that we're in hosts a number of tenant firms, as well as the Boston Fed. And over time, this area has been enhanced with many buildings and development projects. And I just want to highlight the restoration of Dewey Square, the creation of the Greenway, and of course, the remarkable growth just east of us of the Seaport.

So we here at the Boston Fed are working on a variety of functions and all of them support the foundations of our economy and our financial system. And that is in the service of our overarching public mission, which is a vibrant economy that works for everybody, not just for some people. And along with that, we have a much broader portfolio than many people realize.

It includes, of course, monetary policy. And I'll say quite a bit more about that today, a range of economic research, bank supervision, payments, financials, infrastructure services and community economic development. And so it's really quite a broad portfolio. Today, my comments will focus on the economy and monetary policy as we begin this new year. And so I want to start out by saying our economy is in a good place overall.

However, economic uncertainty is high and additional information about developments and inflation in the labor market, about possible fiscal and trade policy changes and many more things will be key to determining the appropriate course for monetary policy in the year ahead. In my remarks today, I'd like to do four things. I'm going to start by describing just what I mean by saying the economy is in a good place overall, and that'll refer both to current conditions and also to my outlook.

And that'll lead me to a brief discussion of the elevated uncertainty I've already mentioned and implications for monetary policy. And then I want to end by offering a few reflections as I look back on 2024 that are influencing how I'm thinking about the year ahead. And then I look forward to taking questions and in a conversation with Kim, and I know that a number of people in the audience helped to contribute to that list of questions.

So thank you for that as well. But before I launch in my standard disclaimer, these are my own perspectives, and they do not necessarily reflect the views of my colleagues at the Board of Governors or at other Reserve Banks. So my views about the economy are based on a wide range of information, and that includes assessments of a broad array of quantitative indicators that my team and I monitor - statistical analyzes, and also what I learn from those engagements with stakeholders across the Boston Fed's First District, which is most of New England.

There's some mixed signals and all of that information and the data continue to be noisy. And I'll say more about that in a moment. But still, key dimensions of the economic picture seem reasonably clear to me, and that in particular includes, with respect to progress towards price stability and maximum employment, which are the two parts of the dual mandate the Fed has from Congress.

The Fed defines price stability as 2% inflation. But, you know, I like to think about it more as a low and stable level of inflation such that people aren't really thinking about inflation as they go about their activities. Well, clearly that is not a context that has prevailed since inflation surged in the aftermath of the pandemic. And we have all seen just how difficult that is and has been for households, for firms, in a variety of different ways.

Maximum employment, the other leg of the Fed's dual mandate, that's a less precise definition, but can be thought of as an economic environment that offers job opportunities for all of those who would like to work. So as we enter 2025, inflation is down significantly from its 2022 peak and the data point to a gradual, if uneven, bumpy path back to the Fed's 2% inflation target.

And importantly, this progress that we've made so far has been accomplished with a labor market that stayed healthy overall. As the unsustainably hot job market conditions from two years ago cooled and cooled in an orderly way, demand and supply for workers is now in much better balance, and the unemployment rate has remained low by historical standards amid solid economic growth.

And that's all good news. And it's really central to what I mean when I say that the economy is in a good place. I'd like to briefly note three sets of factors that have contributed to those positive outcomes so far. The first are developments that relate to the supply side of the economy. Economic growth that's demand driven tends to be inflationary.

You know, the strong demand, tends to put pressure on prices and raise inflation. And in contrast, the combination of strong growth with limited signs of new price pressures points to supply improvements, playing a really important role. And in that dimension, there are a number of different types of supply improvements we've seen, supply chain normalization has been particularly important.

And that was particularly true back in 2022. We've also seen growth in labor supply and in productivity. The labor supply expansion has come both from significant increases in immigration and also from a larger than expected rise in the prime age labor force participation rates. And if you look at the data, in fact, that rise has been evident across gender and racial and ethnic groups.

And those supply improvements were particularly welcome given how tight labor markets were, as we came out of the pandemic. But last but not least, I want to highlight labor productivity or output per hour worked. That's been growing notably faster than it did pre-pandemic. So to be clear, there are many possible explanations for this rise in trend growth of productivity, and it's not clear how long it will persist.

But the improvements to date have had favorable implications supporting economic growth and the disinflation process, and is certainly one of the things that we're quite interested in and that I've heard about, from business owners, large, medium and, and small, in my conversations around the District. A second factor has been restrictive monetary policy actually doing its job and helping to rebalance demand and supply by restraining the interest-sensitive components of demand and thus reducing the pressures on wages and prices.

The large, rapid increases in the Fed's policy rate in the second half of 2022, followed by more gradual hikes and then holding rates at 5.5% for over a year, underscored the Fed's commitment to restoring price stability, and it helped to keep long term inflation expectations from rising. And expectations, of course, are really important in influencing people's behavior, which then feeds through into demand and other dimensions of how the economy's dynamics unfold.

And the fact that inflation expectations have remained well anchored reflects the Fed's earned credibility, and again, is something that I will continue to watch closely. The third point, which is related, is that both household and firm balance sheets were unusually strong coming out of the pandemic, and that supported economic growth even in the face of higher interest rates.

While balance sheets remain in good shape, some of the buffers have waned over time as many households have depleted their excess savings and as corporate cash balances have reverted to pre-pandemic trends. This normalization was accompanied by a slowdown in labor demand. A cooling labor market was an important reason for beginning to reduce the degree of policy restrictiveness in September, and this policy decision was reinforced by concerns about possible emerging fragilities as slowing and more concentrated payroll growth, as well as declining quit and job finding rates appeared in the data, and the increased risk of more pronounced and, unwanted weakening of labor market conditions. And with inflation heading back to target, a key goal for policy became preserving those healthy labor market conditions while continuing to bring inflation down and I continue to monitor a range of indicators, including labor market indicators, closely. But my concerns about emerging labor market fragilities have decreased more recently, as the unemployment rate stabilized after rising notably in the first half of 2024.

So I've described what I mean and some of the reasons for the economy being in a good place overall. But to be really clear, by describing the economy as in that good place, I am not declaring victory. In particular, while inflation is down significantly, it's still above target. Its decline has been slower and bumpier than I anticipated, and there's considerable uncertainty accompanying my baseline outlook.

So it will be essential to remain data dependent going forward with a clear commitment to restoring price stability over time while being mindful of sustaining healthy labor market conditions. In tracking inflation, I find it helpful to focus on core inflation instead of total inflation, although the core inflation indicator omits the obviously vital although volatile components of food and energy, the core measure is generally a better gauge of the underlying inflation trends. On a 12 month basis, core PC inflation was 2.8% in October and November, and while this partly reflects high monthly readings in the first quarter of 2024, it's only a marginal improvement from the about 3% rate that was registered at the end of 2023. So some insight into the recent disinflation process is provided by taking that core inflation and dividing it into its three components, because those components actually have behaved quite differently. Core goods inflation had declined back to its pre-pandemic range by the end of 2023, as supply chain disruptions normalized. Non-housing services, which is a large and very varied category where inflation has been highly volatile, including that big, unexpected bump at the beginning of 2024, but recently monthly inflation readings for this component, the services excluding housing, have also returned to their pre-pandemic range. And that's something that I'll be watching quite closely to see if it's sustained. Much of the continued elevation in inflation comes from the third component, which is housing services, and that seemed stuck at the end of 2023 and well into 2024.

And this is likely reflected long lags for the rents charged to existing tenants to catch up to the significantly higher rent levels that have often been associated with new leases. Well, here, too, the data are actually promising. If new market rent growth remains subdued as it has been now for a number of months, shelter price inflation should eventually normalize, but it's hard to predict when or how quickly this will happen. Importantly, current labor market conditions also appear unlikely to be a source of new price pressures, even though wages continue to grow more rapidly than their pre-pandemic trend. Analysis by Boston Fed staff show that labor remains relatively inexpensive overall, given the recent productivity gains, which I mentioned, and also, past pace developments.

So there's likely some room for additional wage gains that would help to raise the purchasing power and economic well-being of workers without fueling inflation. Although the rate of price increases as moderated notably since 2022, I certainly and I'm sure all of you have stories as well continue to hear during my visits across New England about how high price levels have eroded purchasing power, in particular creating challenges for lower income households.

And that is certainly a concern. And, you know, is one of the reasons for my continued commitment to restoring and sustaining price stability. In fact, history has shown that periods of sustained price stability can create conditions where the benefits of economic prosperity are shared out more broadly. And to me, this is another reminder that not just restoring, but maintaining price stability is an essential part of the Fed's mission to serve the public.

So I'll turn to policy and my outlook after I say a bit more about the elevated uncertainty. A speech that I gave at Wellesley College in the fall of 2023 focused on monetary policy amid uncertainty and drawing on what is a large literature on this topic that summarized, for example, in a very influential speech that then Fed Governor Ben Bernanke gave in 2004, my remarks emphasize two points.

First, there are multiple types of uncertainty. At the time that I gave that speech, all of them were elevated. And in fact, uncertainty remains elevated today. One type of uncertainty relates to data and measurement of key economic variables. For instance, monthly inflation indicators such as the PCE that I mentioned, but also the CPI continue to exhibit more than the usual degree of volatility. And it's also a wide range of views about current levels of economic fundamentals, things like the potential or trend growth rate of the economy and also the neutral rate of interest.

A second type of uncertainty is about relationships between key economic variables that influence policy decisions. For instance, as I've noted, the Fed increased rates rapidly starting in 2022 and has maintained a restrictive policy stance for a considerable amount of time, but the high interest rates appear to have had a smaller and more delayed impact on demand than would have been suggested by historical estimates.

The third type of uncertainty relates to unforeseen future events, including pandemics, natural disasters, future policy changes and geopolitical developments. And here I'll just note the sizable recent rise in indicators of U.S. trade policy uncertainty.

So that was the first thing - the different types of uncertainty and the extent to which, they are elevated.

The second thing that I talked about was that the heightened uncertainty about current economic conditions and benchmarks, and about the economy's response to policy changes that typically calls for a cautious, gradual approach to monetary policy decision-making. The need for a more aggressive set of policy adjustments typically arises when policymakers see imminent risks to the achievement of their objectives, but within an economy that's in a good place overall and policy already closer to a more neutral stance, I view the current nature of uncertainty as calling for a gradual and patient approach.

So amid this uncertainty, the Federal Open Market Committee, or FOMC, began normalizing policy in late 2024, beginning with a 50 basis point cut in September. And I saw this move as appropriate, given the significant, if bumpy, progress on inflation. The adjustment recognized that there was no need for further cooling of the no longer overheated labor market, that a given nominal policy rate would become increasingly restrictive as inflation came down, and that as the pace of growth moderates, the economy can be more vulnerable to adverse shocks.

I also supported the smaller additional rate cuts in November and December, though for me, the most recent one was a closer call. On balance, the December cut provided some additional insurance to preserve the healthy labor market conditions, while maintaining a restrictive policy stance that is still needed to sustainably restore price stability. Looking ahead, my current outlook is broadly in line with the median forecast in the December Summary of Economic Projections, or SEP. In particular, I expect inflation in 2025 to run somewhat higher than I previously thought, with the risks likely having shifted to the upside.

And as I've discussed, while inflation is notably closer to the 2% target, it's proved stickier than anticipated. However, it's too early to tell how future policy changes by the new administration and Congress might influence the trajectories of inflation and economic activity. Separately, I'll note that it'll take some time for the effects of our monetary actions and policy actions already to filter through the economy, and that's often referred to as the long and variable lags of monetary policy.

And while the labor market remains healthy, I will continue to watch for possible fragilities, remaining attentive to both sides of our dual mandate and recognizing risks to both inflation and employment. Again, this context calls for a patient approach to policy, taking the time to fully assess available information and not overreacting to individual data readings. As we calibrate policy meeting by meeting, and as in the median SCP projection, this likely implies a more gradual approach to policy normalization, but there is no preset path, and a projection just is not a promise.

In my view, policy is well positioned to adjust as required to evolving conditions and holding, that means holding the current level longer if there's little further progress on inflation or easing sooner if the need were to arise.

So as I reflect on economic developments from the past year and more generally, from the two and a half years that I have served as Boston Fed president, three things have stood out that are influencing my thinking about the year ahead. And while I've mentioned each of them in my remarks today, I'd like to pull those lessons together and then wrap up by connecting them to policy.

The first lesson is really just don't forget about the supply side of the economy. Supply factors played a critical role in economic developments and have done so since 2020. Arguably, the severity and persistence of supply chain disruptions were underappreciated as inflation surged and as noted above, favorable productivity and labor supply developments have been key to the progress that we have made both to disinflation amid strong economic growth and also to solid wage growth that's increasing purchasing power without fueling price pressures.

You know, in hindsight, some of these linkages may seem evident, but they were not fully appreciated. Of course, we can't count on such favorable supply developments persisting, but either way, the supply side of the economy will continue to warrant very careful attention.

Second, recognize that unusual features of the economy are persisting post-pandemic. My remarks highlighted two examples. One is the longer than expected cushion from strong household balance sheets in the aftermath of the pandemic. This has contributed to resilient household spending and potentially lengthened the time for higher rates to work their way through the economy. A second is the longer-than-expected catch up process of existing, rents to new market rents, and the associated difficulties in predicting the evolution of shelter inflation in the post-pandemic housing market.

And third, focus on distinguishing potential new price pressures from the dynamics of past shocks. This point connects closely with the second point, in particular, my confidence that shelter inflation is on a downward, if slow and bumpy trajectory, relates directly to the evidence that new market rent growth has stabilized at its pre-pandemic level. And provided that this pattern continues, there's much less reason for concern about the longer than expected catch-up period to narrow that gap between rent levels on existing and new leases.

Similarly, the likelihood that recent solid wage growth will generate new price pressures must be assessed in the broader context of productivity developments and past inflation. And there's little evidence of this so far, and I will be looking carefully to see if new price pressures emerge in the months ahead. Importantly, as I've noted, uncertainty remains elevated and this includes that volatile or noisy monthly data, uncertainty related to unusual features of the post-pandemic economy, such as those I've just noted, uncertainty about possible future fiscal trade and other policies, and uncertainty about fundamentals such as the neutral rate of interest. With noisy data providing mixed signals, focusing only on a few indicators can point a misleading picture. And so it's essential to assess a broad range of information over time to gain a clearer picture of current economic conditions and, importantly, their likely evolution. Furthermore, as I've emphasized in this context, with the economy in a good place overall, but significant risks and uncertainties, the appropriate policy strategy is gradualism, anchored by holistic assessment of the data, careful analysis and patience.

So with that, I'll say again thank you to NAIOP, to Tamara Small and to all of you for being here today. Very best wishes for the year ahead. And now I look forward to sitting down with Kim and having a conversation and taking some of your questions. Thank you very much. Thanks.

Kimberly Sherman Stamler

Okay. Morning, everybody. Dr. Collins, thank you so much for your remarks, for your leadership in the Federal Reserve System here in New England and the region, and for hosting NAIOP today. It's great to be here and to be with you and Tamara and to the NAIOP team - thank you so much for organizing today's events.

I have a question. I'm looking forward to the dialogue and for our conversation. And, based on your remarks and your comments, just thinking broadly, I plan to in the time that we have, go over just a couple of things, just to hear a little bit further about your thinking and how you're thinking about things.

So you shared your perspectives on the economy today and I think that, you know, as you went through so many different topics, it's really interesting to hear about how the Fed thinks about different areas of the economy, but specifically, sharing your perspectives on the economy. It might be interesting to take us behind the curtain a little bit and think about the FOMC.

So how do you and your team prepare to contribute to the interest rate setting meetings of the FOMC? And what are the meetings like?

Susan M. Collins

And again, thank you for moderating this discussion. So, you know, it's actually a question that I get asked a lot. So what is it like to be around the FOMC table? And as somebody who had for a lot of her career focused on, monetary policy as part of my economic research, it is different to actually be in that room, but maybe the place to start is just that, you know, the work that we do as part of the FOMC, like, monetary policy is really important for people, for our communities, for our economy, it impacts all of us. And so, the importance of that work is really front and center and reflected in the extensive preparation. And again, I speak for myself, but of course, all of my colleagues, undertake as well working with our team. So let me just say a little bit about what, you know, what I do and what that's like, and so, you know, first of all, to the best of our ability, understand the dynamics of an evolving economy, focusing on the parts of that Congressional mandate, inflation and maximum employment.

We look carefully at a lot of the data, and analysis. But I really do want to emphasize that I learned a lot from the conversations that I have around the District. You know, the data on Friday, tomorrow, we're going to get the new jobs report and that's going to tell us about December. Right? So the data is actually giving us information about what happened in the past. Talking to people helps to round that out in a variety of ways, including how they're thinking about current conditions and what they're thinking about going forward. And so we gather all of that data to try to have a clear sense of how, you know, things are, evolving. And there are 19 members of the FOMC, there are seven governors in Washington at the Board of Governors, including Chair Powell, and then there are 12 Reserve Bank presidents, of which, of course, I'm one. And so we've all come in with that preparation. And what happens at the actual meeting is a, you know, initially a set of, extensive briefings from the staff, and discussions around that in terms of what others are seeing and sharing perspectives and information that's robust. People listen carefully to each other and often do have different views and questions. And then we do an economics go-around where each of us shares our perspectives on the economy. And I do a number of things in that, it evolves depending on the context. But I always do share information about the First District, Monetary policy is national, so I do think that those aggregate numbers, can mask a lot of variation and it's helpful to hear the range of context across the region. And then the second day, there's a second go-around that focuses on our policy views. And again, there's a range and, they're quite robust.

And then, once the decision is made and is voted on, there's a statement and then a press conference, typically on the Wednesday. About three weeks later, the minutes from the meeting are made public and the minutes from the December meeting were made public yesterday, actually, and then five years later, the transcript of the whole thing is made public. And so Fed watchers actually have quite a bit of information that they're able to review. So just, just a sense, it's, you know, very focused, really substantive period, with a range of different perspectives and views that are expressed.

Kimberly Sherman Stamler

It's really interesting to hear. And, is there a particular set of data or what data do you look at most closely to assess the economic conditions?

Susan M. Collins

So that one's really hard, because I think of there being almost a constellation of data and it's you're trying to get that bigger picture with pieces of information, you don't have a photograph and it's evolving. And so it's hard to pick out 1 or 2 things that I look at, but it does evolve over time.

Right? So a couple of years ago, I was much more focused on things like how those supply constraints were evolving. I still look at that, but I'm not spending as much attention because the one normalized. Some of the things that I am looking at now, and it's more sets of things than individual ones, on the inflation front, as I mentioned, looking at longer term expectations really matters. That would be a concerning signal if they really started to drift up and see whether those new price pressures emerge is important as well. So there are lots of different inflation indicators, in particular the parts that have been sticky. Are we continuing to see the promising news we saw in November? And then on the labor market side, is there evidence of new pressures as well, or evidence of emerging fragilities? There are a lot of unemployment indicators. We tend to focus on the unemployment rate, new claims for unemployed. How long does it take people to find jobs? And then the other thing I will flag is, as the new administration comes on board,there will be a lot to focus on in terms of how policy might evolve. And we'll get quite a bit more information about that. That will be very important as well.

Kimberly Sherman Stamler

Yeah. Thank you. Bringing that conversation to New England and to the First District. How do you bring the New England's perspectives both to the FOMC table and generally you're focused on hearing from, all sorts of stakeholders that are experiencing, the economy's challenges and opportunities. What are some of the things that you consistently hear in your listening trips around the region?

Susan M. Collins

Yeah, there's a lot to say there. The conversations that I've had have been very substantive and varied. I have to say, it's one of the favorite things that I do in my job, being able to engage with people participating actively in the economy. From my perspective, having that be a two-way conversation is important.

I learn a lot from understanding how people who are participating on the ground in a particular area, what they're seeing, what they're thinking. But I also see it as an opportunity to talk a bit about the Federal Reserve, what we do. People may not agree with some of that, but I think that it's important to have those conversations and to be open and willing to explain.

So there are a number of different things that I've heard. So first of all, there's a lot of optimism in New England. The vibrancy, the innovation, is inspiring. And there's so many examples of projects that I've learned about and initiatives that are underway. You know, each of the regions of our economy is a bit of a different industrial mix and so there are variations, there are differences, areas of health care, biotech, education, innovation. There are lots of things that are here. But I also hear a lot about the challenges. Every meeting that I go to, I hear about housing challenges. And I suspect we may talk a little bit more about housing. So, but also transportation, childcare, some of those things are barriers for people to be able to participate in our economy.

And, they really matter. They're very much economic issues. And so learning more both about how those challenges are unfolding and some of the initiatives and things that people are doing, often collaboratively, to try to improve the context.

Just two quick things that I will say, very early on, I started hearing about the extent to which the housing challenges were actually a constraint to hiring, which was a, you know, it's not just affordability, which is also very important, but availability across the income distribution, white collar folks, just for a variety of different reasons and that broader context, which, is a national one, longstanding and again, I suspect we'll come back to it, but that that element of linking it more closely to labor markets. And then I also heard very early on about all that many businesses were doing, to enhance productivity, in part because it was so hard to hire and that they needed to find ways to, really effectively deploy the labor that they had.

And so those things had me, you know, influence the data that I looked and some of the analysis that we're doing. So I see it as a kind of complementary type of thing. And the information that I've heard certainly, is part of what I share at the FOMC table and what my colleagues share about their districts as well.

Kimberly Sherman Stamler

That's really helpful to hear. And just adding a little bit more to the housing affordability and availability conversations that you frequently hear when you're connecting with folks around New England, whether it's urban centers in Boston or rural areas in Maine or Vermont. You talked a little bit about what you're hearing, on the ground for business and community leaders about how housing issues are affecting workers and residents. What role can or does the Fed play in helping to address the nation's housing issues?

Susan M. Collins

So that's a that's an important question, you know, and housing is key in so many different ways. It is typically the biggest asset that households have is also important in terms of mobility. I mean, it has an impact in a variety of different contexts. The challenges that we have in a housing market are ones that are longstanding, which arguably have been exacerbated by some of the dynamics of the pandemic. And so addressing them requires understanding that it's going to take all of us working together and that there are different kinds of roles to play, from the role that state and local and national governments can play, the role that business leaders can play. So certainly the Fed has a key role in terms of, it's controlling inflation, so price stability matters. The rise in inflation impacted the ability of construction and created challenges there. And certainly one of the, things that bringing inflation sustainably down will do is help to create an easier context for construction and in that context. So, of course, I recognize that the high rates also add to the costs there. And that's, important to recognize and at the same time, that's a temporary context. And, is central to realigning demand and supply to bring inflation back down.

We also do quite a bit of research, both here in Boston, across the System, to better understand what things work well, what the challenges are, and we can bring people together. But it's going to take all of us working together. And the Fed has one set of goals. There are many, many other, groups in our society. They're going to have to play a key role to address what has been a very long-standing problem.

Kimberly Sherman Stamler

Thank you. Switching to banking for a minute, what do you see as the biggest challenges facing the banking sector in the current environment? And how is the Fed working to ensure the safety and soundness of the financial system?

Susan M. Collins

Yeah. So, as I mentioned briefly, one of the key things that we do is the supervision of some of the financial institutions in our district, and, you know, engage with banks of all sizes, which are really critical to a vibrant economy. So if you look at, recent assessments of banking conditions - I'll start with nationally - what it shows is a banking system that is resilient overall and that has, you know, strong capital levels, that has, stability in terms of liquidity and funding. That's what some of those data are showing. Of course, there are certainly challenges as well. And those are things that we monitor carefully. And, that's certainly true in the First District here as well. So overall and I'm, I'm, realizing time is going-

Kimberly Sherman Stamler

I know, I was thinking that too.

Susan M. Collins

So overall, are, you know, as you look at the banks here, similarly, we have, our banking system is quite resilient. And while we certainly see that banks have had to address the challenges of a higher rate environment, which can put pressure on net interest margins and funding costs, but they have been able to do that in a context, managing reserves, and that, again, is something that we pay close attention to.

Certainly one of the challenges relates to commercial real estate. And, you know, in that context, in particular office space, but also, you know, the dynamics in the lab, laboratory environment as well. But having said that, the strong consumer spending, there's quite a bit of, you know, momentum in hotels and in some of the other and retail and some of the other areas, so there's quite a mixture. And even in office space, the information for this, more local area shows vacancy rates coming down somewhat. So lots to watch. There are many things to stay focused on. In terms of the safety and soundness, we are certainly actively monitoring that banks are well prepared in the case of stress events that that could happen. And are, you know, we're vigilant about, concerns related to cybersecurity. That's a big issue, not surprisingly, I think, for so many industries and certainly the banking side, area as well. And there has been quite a bit of work underway, to really focus on the speed, force and agility of how our supervision processes are actually implemented.

So there's a lot of work underway there. But again, I'll just end with where I started on that one and that is the overall resiliency of our banking system that is clear from the assessments that we have.

Kimberly Sherman Stamler

Great. And I'm just looking at time, I think we have time, just a little bit more. So let's bring it back to New England and to the Reserve Bank here as we head toward our close. So we talked about, so much of what the Federal Reserve does, can you tell us a little bit more about the regional Reserve Banks and specifically, we talked about speaking with industries across the New England region, but what else does the Boston Fed do, tat people in our fields and people in the room should know about?

Susan M. Collins

Yeah. So, thanks for asking about that. And as I said briefly in my remarks, we have a much broader portfolio. Most people don't know what the Fed does. Maybe just a step back for a moment. There are 12 different reserve banks and each of us- so the Federal Reserve System was created more than 100 years ago, and it's a federated system. So there is a Board of Governors in Washington, D.C., but each of the Reserve Banks has a kind of foundation in its district and engages across the district in a variety of different ways. So lots of things to talk about. I could talk about the range of different types of research we do. We have a New England Public Policy Center, which it does research and analyzes data that is specifically focused on our region. And they have a, you know, also vibrant on page and, indicators widely available. I could talk more about a variety of things, but let me just talk very briefly about two. One is payments. People often, you know, how does that cash end up in the ATM? You know, there is a management behind the scenes of the infrastructure related to how payments get made in the system. And the Federal Reserve is behind a lot of maintaining that infrastructure. Everything from, that to electronic payments, but, more recently, I wanted to flag that just over, about a year and a half ago, the Boston Fed was key to leading an initiative called FedNow, which is an instant payments service infrastructure that was launched in July of 2023. And, started with, you know, a small number of banks and now has over 1,000 banks, across the country, but again, that, infrastructure, a lot of that work is led out of the Boston Fed, which is something that we're proud of, as, an infrastructure to provide, through adopting banks real-time instant payment services.

The other thing that I'll just talk briefly about is our community development initiatives, and we have a very, kind of active program that focuses on supporting vibrancy in low- and moderate-income communities. One initiative is called Working Places. And there are 30 sites across five of the states in New England where local leaders across different sectors have come together to collaborate and identify what they see as the main challenge in their area. It maybe, you know, a small town that lost its industrial base, it may be a rural area and then collectively developed strategies to try to address them. And that is an approach that, we see as over time helping to create vibrancy in those kinds of communities, and again, it is one of the examples of the ways we work collaboratively to support vibrancy across our region.

Kimberly Sherman Stamler

Thank you. And, Susan, to wrap up, so you've been in this role for two and a half years. You're going to be resuming the role of voter on monetary policy this year, in the rotation of bank presidents. Two and a half years in, and I think the list is probably long, but, what's the one thing you're proud of doing in this role and one thing that you're eager to do more of in the role in the coming year?

Susan M. Collins

One thing

Kimberly Sherman Stamler

I know it's tough.

Susan M. Collins

There are a lot of them. So, so as I look back on two and a half years, I have to say it's gone so quickly, right? A lot happens and time goes very quickly, I would say I'm very proud of the engagement that I but this is a team effort, it's working together with the really, dedicated experts here at the Boston Fed, to really connect in a broader set of ways with our District and with a variety of different kinds of stakeholders. So that may be one thing that that I would highlight, you know, in terms of, looking forward, you know, I have to say, and again, the team effort working with our teams, with others outside, to continue to deepen our understanding of economic dynamics so that we can make the best monetary policy decisions that we can. There's always more to learn. I, you know, I think having a bit of humility is appropriate. There's a lot of uncertainty. You know, we and others don't always get things right. Certainly. But, pulling together to the best of our ability, the information we have to make those decisions is just so important. And I really look forward to doing that because it matters and it's core to the public service mission of the Federal Reserve. So thank you.

Kimberly Sherman Stamler

Terrific. Terrific. Well, Susan, thank you so much for speaking to the group today. It's an honor to serve on the board and to have the conversation with you today. And I think that I'm going to turn it over to Tamara. Thank you, Susan.

Tamara Small

All right. Thank you so much. President Collins and Kim, this was a great conversation. And it's my understanding this will actually be posted on the Federal Reserve Bank of Boston's website later today, and your comments will also be available, right, so everyone can take a look at that as well. We really do want to thank you. We're a few minutes before 10:00, and to be honest, I've never had to do a national moment of mourning before in my life, so I don't know if we just take a pause now, even though it's a few minutes before 10:00. So we would ask everyone just to take a moment, in recognition of the death of President Jimmy Carter, and acknowledge this national moment of mourning. Thank you so much.

Okay. Thank you so much. And we wish all of you a wonderful new year. This is our first event of 2025. Many more to come. Thank you for being here. Thank you for being members. And thank you again to our speakers. Have a great day. Take care.