According to Susan Collins, the current economic strength gives officials time to carefully assess new developments. One of them is the ongoing impact of tariffs.
Collins acknowledged that tariffs are starting to affect the prices of some goods. However, she noted that the damage could be less than expected. The Federal Reserve official explained that some companies are choosing to accept lower profit margins rather than passing the costs onto consumers.
Meanwhile, American households continue to spend even with rising prices. This spending dynamism is helping to mitigate the negative effects of tariffs on the overall economy, which in turn reduces the urgency for a rate cut by the Federal Reserve.
She also pointed out that recent inflation data shows a heterogeneous picture. The June consumer price report indicated that inflation increased at a slower pace than economists had predicted. However, Collins warned that price pressures stemming from tariffs continue to build in some areas.
Federal Reserve officials have kept interest rates stable until 2025 while monitoring inflation and growth. Collins stated that this approach remains appropriate given current conditions and that the timing of any Federal Reserve rate cut should be based on clearer evidence. Her message aligns with the cautious stance taken by the president of the Federal Reserve Bank of Cleveland, Hammack, who also argues that inflation remains too high to justify a Federal Reserve rate cut.
Meanwhile, the price of Bitcoin fell following the release of the June CPI data. With a year-on-year increase of 2.7%, the figure slightly exceeded experts' estimates, reinforcing expectations that a Fed rate cut may not occur soon.