In a speech at Georgetown University in Washington, Susan Collins, President of the Federal Reserve Bank of Boston, expressed concerns about the potential impact of the large trade tariffs proposed by the Trump administration. Collins anticipates that these tariffs could lead to higher inflation and slowed growth in the short term.

The uncertain economic environment poses challenges for the central bank in managing interest rates to maintain price stability and support the job market. Collins believes that current monetary policy is suitable for the present circumstances, but acknowledges the need for flexibility given the unpredictable nature of the situation.

Although she expects inflation to eventually align with the Fed's 2% target, Collins anticipates that core inflation levels could exceed 3% in the near term due to the import tax surge. She highlights the importance of preventing inflation expectations from escalating and emphasizes the need for adaptable monetary policy.

Collins suggests that lowering the federal funds rate later in the year might be appropriate, but emphasizes caution in making preemptive moves against potential economic risks. The fluctuating market conditions resulting from the Trump administration's tariff policies have raised concerns about the stability of the economy, prompting discussions about the possibility of Fed rate cuts.

As financial markets respond to the uncertain trade environment, Collins advises vigilance in monitoring economic developments and maintaining a balanced approach to monetary policy.