Fed Official Sees Strong Economy as a Buffer Against Tariff Effects

Susan Collins, who leads the Federal Reserve Bank of Boston, believes the economy is strong enough to handle tariffs without immediate action from the Fed.

Key Points

• Businesses and households are in good shape, which might soften the impact of higher tariffs.
• The Fed can afford to be "actively patient", meaning they won't rush to cut interest rates.
• The Fed has kept rates steady this year, waiting to see how President Trump's trade policies play out.
• Inflation reports show mixed results, with consumer prices in June rising less than expected for the fifth month in a row.
• Some goods' prices are starting to be affected by tariffs.
• Companies might shrink profit margins, and consumers might keep spending even with higher prices.
• The Boston Fed has a new way to track how tariffs affect prices.
• Collins expects inflation to be around 3% by the end of the year before it starts to drop again. In May, it was at 2.7%.