Federal Reserve Collins: Keeping interest rates on hold for a while may be appropriate

On Wednesday, Boston Federal Reserve President Charles Collins, who voted in favor of a rate cut last month, said she believed the bar for further rate cuts in the near term was "relatively high" because of concerns that inflation remained elevated. "Unless there are clear signs of a deterioration in the labour market, I would be cautious about further easing, especially as the shutdown limits the amount of inflation data we have... In the current highly uncertain environment, it may be appropriate to maintain the policy rate at its current level for some time in order to balance inflation and employment risks." Her remarks highlighted deep divisions within the Fed. Since the last rate cut, several Fed officials, both voting and partially non-voting, have signalled growing caution about rate cuts, including Mr. Collins, who sees short-term borrowing costs in a "mild tightening" range while financial conditions remain broadly a tailwind to growth. The labour market has indeed slowed, but downside risks have not increased since the summer.