After aggressively cutting interest rates in the second half of 2024, the U.S. Federal Reserve is expected to take a measured and patient approach in 2025. Federal Reserve Bank of Boston President Susan Collins is one of the officials supporting this course.
In a recent interview with Bloomberg News, Collins said that she believes the latest employment data and lingering inflation call will result in fewer rate cuts than previously expected.
“Over time, it will be appropriate for some more easing, but perhaps somewhat less than I might have thought back in September,” Collins said. “Taking the time to really patiently assess the data holistically — to be analytic and patient — seems to me very likely to be appropriate as we think about policy going into 2025.”
Collins explained that the Fed officials might adopt a faster pace in case inflation shows further signs of cooling down. But if the data is inconclusive, the Fed will likely elect to stand pat.
However, she is optimistic about the labor market, where the data is more favorable.
“On the labor market side, there were more concerns for me earlier about potential fragilities. Those concerns have eased,” she added.
The Fed slashed its benchmark rate to 4.25% to 4.5% during its December meeting. At the time, the officials said they would wait to see further improvement in inflation data before making their next move. Additionally, they forecasted just two rate cuts in 2025 compared to projections of four rate cuts from the September meeting.