Fed's Collins urges patience on rate cuts as inflation risks persist
Boston Fed president signals March meeting likely to hold steady with 3.5-3.75% policy rate amid uncertain price outlook
Federal Reserve officials should maintain interest rates at current mildly restrictive levels until inflation shows clear evidence of returning to the central bank's 2% target, Boston Fed President Susan Collins said Friday, reinforcing expectations that policymakers will hold steady at the upcoming March 17-18 meeting.
Collins emphasized that she does not see urgency for additional policy adjustments, arguing instead for a patient and deliberate approach as the inflation outlook remains uncertain with continued upside risks. The Federal Reserve's current target range for the federal funds rate stands at 3.50% to 3.75%.
"I do not see an urgency for additional policy adjustments, and I will be looking for clear evidence that inflation is moving durably toward the 2 percent target—something that might occur only over the second half of the year," Collins said in her prepared remarks.
The Boston Fed president's comments align with growing consensus among economists and market participants that the Federal Open Market Committee will maintain its benchmark rate when policymakers gather later this month. Futures markets are pricing in a pause at the March meeting, with traders expecting potential rate cuts later in 2026 rather than in the immediate future.
Inflation data has shown signs of moderation but remains above the Fed's target. The Consumer Price Index rose 2.4% over the 12 months ending in January 2026, down from 2.7% in December 2025, according to Bureau of Labor Statistics data. Core inflation, which excludes volatile food and energy prices, increased 2.5% over the same period.
Collins highlighted that while overall price pressures have eased, specific categories remain problematic. She noted goods inflation has increased due to tariffs, and services inflation excluding shelter has shown little improvement. Small businesses are experiencing rising costs for insurance, energy, construction, packaging, and other inputs, while elevated housing costs continue affecting labor availability.
The Fed's March Beige Book described a "bifurcated economy" with solid industrial growth but a weakening consumer sector and new trade pressures, reinforcing the case for a cautious approach to policy adjustments.
Looking ahead, Collins suggested she will need to see sustained evidence of inflation returning to target before supporting any easing of monetary policy. Her assessment that clear evidence "might occur only over the second half of the year" implies the Fed could maintain current rates through mid-2026 before considering cuts.
Market expectations for the remainder of 2026 vary. The Federal Reserve's official dot plot shows a median expectation of one 25-basis-point cut, Goldman Sachs anticipates two cuts likely in June and September to 3%-3.25%, and futures markets are betting on two 25-basis-point reductions in April and September. However, JPMorgan recently revised its forecast to expect no changes throughout 2026 due to labor market stability and persistent inflation risks.
Collins' remarks come as equity markets face pressure from rising geopolitical tensions and shifting monetary policy expectations. The S&P 500 fell 0.7% this week, while the Dow Jones Industrial Average declined 2.1%, as investors temper their expectations for immediate rate cuts following recent developments including a surge in oil prices.
Federal Reserve Chair Jerome Powell has previously emphasized that policy decisions will remain data-dependent, with officials seeking confidence that inflation is on a sustainable path to 2% before adjusting monetary policy. Collins' comments reinforce this message of patience as the central bank navigates what she described as a "still-uncertain inflation picture."