Boston Fed President says may be appropriate to ease policy further

In her speech titled “Views on Current Economic Conditions and Monetary Policy”, Boston Fed President Susan Collins said: “Anemic job gains amid solid economic growth are a somewhat puzzling combination. The current state of heightened uncertainty may explain why many firms are reticent to hire, while also trying to get more output from existing workers.1 Indeed, as shown in Figure 2, labor productivity continues to expand more rapidly than its pre-pandemic pace, as firms are finding ways to increase efficiencies.2 This was a priority coming out of the pandemic when it was difficult to find workers. A continued productivity- enhancing mindset, which is ubiquitous in my discussions with CEOs across New England, may now be tempering hiring despite solid economic growth… As I look ahead, my baseline outlook continues to be relatively benign. I anticipate hiring will pick up as firms adjust to the new tariff environment. And while inflation is likely to remain elevated into next year, I expect it to resume its gradual return to target over the medium term. This outlook is similar to the median forecast in the September Summary of Economic Projections (SEP). But in this highly uncertain environment, I do not rule out scenarios featuring higher and more persistent inflation, more adverse labor market developments – or both. Still, with less scope for inflationary pressures from the labor market, the upside inflation risks I was concerned about a few months ago are more limited. In this context, it may be appropriate to ease the policy rate a bit further this year – but the data will have to show that.”