Susan M. Collins, president of the Federal Reserve Bank of Boston, said that she expects the central bank to cut interest rates at least once this year as it continues to monitor the impact of President Trump’s tariff policies on prices and the job market.
Her baseline forecast calls for the Fed to ease rates “a bit” this year, with further reductions in 2026, she said in an interview on Friday.
“There is still a lot of resilience in the economy,” which remains “solid overall,” Collins said. “We really do need to see how things clarify, how [tariff] policy evolves.”
The Fed voted on Wednesday to leave its benchmark lending rate unchanged in the range of 4.25 to 4.5 percent. The short-term federal funds rate — which influences borrowing costs on mortgages and credit cards to business loans — hasn’t changed since December following a full percentage point of reductions in 2024.
The 19 Fed officials who met this week ― seven from the central governing board and the 12 regional bank presidents ― were split in their outlook for rates. In new projections, 10 said they expected the central bank to drop rates at least twice this year, two forecast a single reduction, and seven penciled in no change.
“I don’t see an urgency to adjust rates,” said Collins, one of 12 voting members of the Fed’s rating-setting committee this year. “We do not have that sustained price stability that I’m looking for.”
Her view aligns with that of Fed chair Jerome Powell, who said on Wednesday that a wait-and-see approach made sense because the economy was in good shape and the inflationary effects of tariffs imposed by Trump remained uncertain.
“We haven’t been through a situation like this and think we have to be humble about our ability to forecast it,” Powell told reporters.
Trump has lambasted Powell for not cutting rates, saying before the Fed’s decision was announced that it should drop them by as much as 2.5 percentage points.
The president argues that lower rates would make it cheaper for the government to sell long-term bonds to finance the deficit. If inflation flares up, the central bank could reverse course, he said.
It’s an opinion shared by Fed Governor Christopher Waller, who said Friday on CNBC that he favors lowering the federal funds rate as soon as next month because the impact of tariffs on prices will be short-lived.
“I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” he said. “We’ve been on pause for six months to wait and see, and so far the data has been fine.”
Collins was much more cautious. While the impact of tariffs might not be as big as thought in April — before Trump temporarily backed off his most extreme trade taxes — Collins said she still expects inflation to rise, the economy to slow, and the labor market to soften.
“The risks,” she said, “are still to the downside on growth and the upside on inflation.”
Larry Edelman can be reached at larry.edelman@globe.com.