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Investing.com -- Federal Reserve Bank of Boston President Susan Collin on Thursday sounded the alarm on tariffs driving up inflation and weighing on growth, though signaled that the bar for near-term further interest rates cuts is high and would require a compelling sign that the economy was in need of rescue.
Collins acknowledged that recently announced tariffs, "are likely to raise inflation this year, while slowing growth," speaking at Georgetown University, but ultimately signaled no change in her outlook for interest rates, saying that, "maintaining the current monetary policy stance seems appropriate for the time being.”
The Boston Fed president highlighted, however, that competing objectives and risks will depend on the economy’s actual and expected distance from the FOMC’s full employment and price stability mandates.
Collins expressed confidence in monetary policy helping to cushion against tariff-driven inflation, saying that "policy should help guard against the risk that price-level increases related to tariffs destabilize inflation expectations."
The path to a further lowering rates could likely be delayed, however, by renewed price pressures, Boston Fed president said, flagging the need for confidence that tariffs "are not destabilizing inflation expectations."
If the Fed were to adjusts policy at elevated levels, Collins said the "signal would have to be compelling to take preemptive actions against the risk that activity weakens by more than expected.”