What Susan Collins Wants to See Before Supporting Another Rate Cut
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This Odd Lots podcast episode features Boston Fed President Susan Collins discussing monetary policy and economic challenges at the Fed's 69th annual economic research conference. (02:07) Collins explains her current stance on interest rates, expressing more concern about persistent inflation than labor market weakness at this time. The conversation covers her analysis of inflation remaining above the 2% target for years, the complex effects of tariffs on pricing, and the uncertain economic environment facing policymakers. (02:47)
- Key themes include the balance between dual mandate priorities, tariff uncertainty effects on business decisions, and the evolving role of AI in productivity and employment
Speakers
Susan Collins
Susan Collins is the President of the Federal Reserve Bank of Boston, having assumed the role in 2022. She participates in Federal Open Market Committee meetings and brings academic expertise to monetary policy discussions. Collins emphasizes data-driven decision making and regularly engages with New England businesses to gather regional economic insights.
Tracy Alloway
Tracy Alloway is co-host of Bloomberg's Odd Lots podcast and a financial journalist specializing in markets and economic policy. She brings extensive experience covering complex financial topics and conducting interviews with key economic policymakers.
Joe Weisenthal
Joe Weisenthal is co-host of Bloomberg's Odd Lots podcast and editor at Bloomberg. He focuses on macroeconomic trends, monetary policy, and market dynamics, often exploring unconventional economic perspectives.
Key Takeaways
Balance Dual Mandate Priorities Based on Distance from Target
Collins emphasizes evaluating "how far each of our dual mandated goals is from the target" when making policy decisions. (35:47) While unemployment doesn't have a specific numerical target like inflation's 2%, she considers full employment as "the maximum employment that you can sustain over time that's consistent with price stability." This framework helps policymakers assess which mandate requires more immediate attention, balancing labor market risks against inflation concerns in real-time decision making.
Understand That Tariff Impacts Are "Long One-Offs" Rather Than Quick Adjustments
Collins explains that tariff effects on prices represent "onetime" impacts that can actually unfold "over months, a year, something like that." (23:34) Research from 2018 tariffs showed it took "five months or more before the peak impact on price levels was seen," and current tariffs may take even longer due to greater complexity and uncertainty. This insight helps businesses and investors plan for extended adjustment periods rather than expecting immediate price changes.
Leverage AI as Efficiency Driver During Uncertain Times
Businesses are adopting an "efficiency mindset" where they're reluctant to hire due to uncertainty but see AI as a "no regrets type of investment." (28:08) Collins observed companies using AI across unexpected sectors, from lumber mills using it to sort planks to various back-office automation. The technology enables workers to "do more and be more focused, saving time in terms of reporting and a variety of different back office kinds of things," making it valuable regardless of future economic conditions.
Monitor Multiple Data Sources During Uncertain Periods
When official data is limited or unreliable, Collins emphasizes "pulling together all the data that we can find" and complementing statistical analysis with direct business conversations. (08:57) She actively gathers regional information through surveys and meetings with various business leaders, noting that "the real information is often in the details" rather than headline numbers. This approach becomes critical during data blackouts or when traditional metrics may not capture rapid economic changes.
Prepare for Multiple Inflation Scenarios Beyond Base Case
While Collins' baseline expects inflation to remain elevated through early next year before the "disinflation process, perhaps slow and uneven" resumes, she doesn't "rule out scenarios where there's a larger increase in inflation or there's more persistence." (20:42) She's particularly concerned about businesses being "surprised that consumers are not pushing back" on price increases, potentially leading to continued pricing power. This scenario planning approach helps policymakers remain prepared for various economic outcomes.
Statistics & Facts
- The odds of a December Fed rate cut were approximately 45% as of November 19, 2025, down from the high 60s just a couple of weeks prior. (03:47) This dramatic shift reflects increasing uncertainty about monetary policy direction amid mixed economic signals.
- Core PCE inflation stood at 2.9% as of the August reading, remaining solidly above the Fed's 2% target. (17:41) Collins emphasized this represents years of missing the inflation target to the upside, contributing to her current policy stance.
- Research from 2018 tariffs showed it took "five months or more before the peak impact on price levels was seen," despite being smaller, narrower, and implemented over a shorter time period than current proposals. (25:13) This finding informs expectations about how long current tariff effects might take to fully materialize.
