Odd Lots – “What Susan Collins Wants to See Before Supporting Another Rate Cut”

Podcast: Odd Lots (Bloomberg)
Hosts: Tracy Alloway and Joe Weisenthal
Guest: Susan Collins (President, Federal Reserve Bank of Boston)
Date: November 21, 2025

Episode Overview

In this episode, Tracy Alloway and Joe Weisenthal sit down in Boston with Susan Collins, President of the Boston Federal Reserve, during the Boston Fed’s 69th annual economic conference. The central theme is navigating U.S. monetary policy in the midst of persistent inflation, a softening labor market, heightened data uncertainty (exacerbated by a recent government shutdown), and unique external challenges like tariffs and AI. Collins discusses the delicate balancing act the Fed faces on rate cuts, emphasizing her criteria and the key risks she is monitoring.

Key Discussion Points & Insights

1. Purpose and Value of the Boston Fed Conference

• Brings together academics, policymakers, business leaders, and experts from various disciplines to examine “The U.S. Economy in a Changing Global Landscape”
• Unique for its diverse participant base and interdisciplinary research (including political science)
• Focus is on deep dives into macroeconomic topics, risks, and fragmentation

“It’s not just academics… we bring together policymakers from different institutions, business leaders... really do a deep dive to understand dimensions of a topic.”
—Susan Collins, [06:00]

2. The Fed's Policy Dilemma: Inflation vs. Labor Market

Current Economic Ambiguity

• Historically high inflation (core PCE at 2.9%) remains persistent and above the target for over five years
• Labor market shows “softening” but no sharp rise in unemployment yet; data confusion due to recent government shutdown
• Odds of a December rate cut have declined, now around 45%

“It is a time of change, both macro, big picture globally, but also just for the near term direction of monetary policy... Probably as ambiguous as it's been in a while.”
—Joe Weisenthal, [02:58]

Collins on Balancing the Dual Mandate

• Views both price stability and labor market health as “equally important” in setting policy
• Labor market: Evidence of both reduced demand and supply; watching for nonlinear risks (potential for sharp, self-reinforcing unemployment increases)

“I have to start by saying I'm really focused on both parts of our mandate… they both really matter... I do think it's clear [the data] reflects both labor supply growth having slowed pretty notably, but also labor demand growth.”
—Susan Collins, [08:08]

• Rate cuts already delivered this fall are seen as responding to initial labor market risk, now closer to a “neutral” policy stance

“That shift in balance of risks... was really a rationale for those cuts that we've already seen. At the same time, we have now moved much closer to a neutral rate… Policy's really only mildly restrictive in my view. And so I, given what I'm seeing so far, continue to see that as appropriate.”
—Susan Collins, [10:08]

What Would Prompt Another Cut?

• Would act “seriously” if evidence of “notably deteriorating” labor market emerges, even if inflation is above target
• No explicit unemployment rate trigger; judgment-based, watching for changes consistent with maximum sustainable employment

“If we were seeing evidence... that the labor market were notably deteriorating, I would take that very seriously. And that certainly could justify near term additional easing.”
—Susan Collins, [33:37]

3. Inflation: Persistence, Expectations, and Tariffs

Is Prolonged Above-Target Inflation Changing Behavior?

• Prolonged period of high inflation has affected consumer and business psychology
• Some firms surprised by minimal consumer resistance to price increases; risk of inflation psychology becoming entrenched

“I've recently been hearing a number of firms… saying that they have been passing price increases and… surprised that consumers are not pushing back. And that's leading them to expect that they might continue to do that.”
—Susan Collins, [18:34]

• “Benign baseline” for inflation, but alternative scenarios (e.g., further inflation persistence) remain possible
• Greatest concern is potential for inflation expectations to become unmoored

“It certainly would be a concern if I were to see evidence that especially medium to longer term inflation expectations... were becoming unmoored. I'm not seeing that right now, but it is something I watch carefully.”
—Susan Collins, [22:16]

Tariffs: Long "One-Off" and Ongoing Uncertainty

• Tariffs expected to cause a “one-time” price level shift, but that process can take months or years
• Ongoing policy/judicial uncertainty around tariffs raises risk of business hesitancy, investment delays, and operational inefficiencies
• Productivity gains may offset some inflationary impact from tariffs

“When I say that my baseline expectation would be that tariffs have a one-time impact on prices... that can happen over time... uncertainty about the tariffs... is one of the key things that's having influence”
—Susan Collins, [23:16]
“We've also seen significant increases in productivity and that is interacting with some of the tariffs, perhaps offsetting the extent to which we're seeing the impacts of tariffs on prices.”
—Susan Collins, [25:12]

• Supreme Court challenge to tariffs adds another layer of uncertainty; scenario planning only goes so far

“There is considerable uncertainty in this space, as you just pointed out... it's something that I think firms, households, local governments are navigating.”
—Susan Collins, [30:38]

4. Labor Market Nuances and Regional Perspectives

• Certain persistent skilled labor shortages in specific sectors and geographies (e.g., aging New England workforce, aviation maintenance, skilled manufacturing)
• Local collaborations between businesses and educational institutions provide “inspiring” models for workforce pipeline development

“There are places where there is more of almost a labor shortage... So there are shortages in some areas and there are also initiatives to try to address them, which I find inspiring.”
—Susan Collins, [31:32]

• No significant wage pressures at present; both supply and demand have moderated, resulting in an “unusual balance”

“I don't think we are seeing significant wage pressures... more recent data... has come down a bit. It's been higher than it was pre pandemic. At the same time, given the productivity that we'd seen, that is consistent in my view with price stability.”
—Susan Collins, [36:01]

5. AI, Productivity, and Policy Implications

• Businesses across sectors, even traditional industries, are increasingly experimenting, investing, and realizing productivity gains from AI
• AI adoption is “everywhere”—potentially transformative, but overall effects on jobs remain uncertain

“It's out there, it’s everywhere... I was not too long ago visiting a lumber mill in northern Vermont... I hadn't expected going to a lumber mill, that we were going to spend quite a bit of time talking about AI.”
—Susan Collins, [37:24]

• Collins views AI as a “general purpose technology” akin to the internet or electricity, likely to create new types of jobs as well as challenges, but warns transition may be faster than in past technology shocks
• The Fed's tools are limited in directly shaping AI impacts, but its policy can play a facilitating role in labor market transitions

“I do think of AI as a general purpose technology, which is like the Internet or like electricity... history is important... a lot of things the Fed focuses on and cares deeply about... but they aren’t the direct thing that our policy tools are able to influence. One reason to have eased a bit is it could facilitate an environment where it's easier for labor to make transitions.”
—Susan Collins, [40:00]

6. Housing Market and Policy Interplay

• High rates both curb underlying housing demand (via costlier mortgages) and inhibit new supply (via costlier development), with long-term consequences
• Fed’s main role is maintaining macroeconomic stability; also acts as a nonpartisan convener, hosting research and regional dialogues

“Restoring and maintaining price stability and maximum employment creates an environment that's really conducive to addressing our housing challenges and sustaining that environment... As a nonpartisan, trusted, data, geekish resource, the Fed can help to bring different groups together to share information to help be a convener.”
—Susan Collins, [43:14]

7. Financial Markets and Local Boston Angle

• Collins and her team monitor financial market signals closely (noting recent volatility, AI-driven bubble talk, and funding market strains)
• Boston as a financial center: Fed’s regional perspective emphasizes the importance of understanding both economic and market dynamics

“Our teams are also very carefully watching developments in financial markets. And you know, we are seeing some more volatility, certainly, you know, compared to the beginning of the year.”
—Susan Collins, [46:05]

Notable Quotes & Memorable Moments

• On the Fed’s Communication Tsunami:
  “Sometimes there's a claim that there's too much groupthink. I don't see groupthink.”
  —Susan Collins, [14:16]

• On Data Blackouts and Policy Ambiguity:
  “As of this morning, everything is very, very uncertain.”
  —Tracy Alloway, [04:00]

• On Tariff Effects:
  “So quite a bit to say about tariffs... It's uncertainty about the tariffs, which is one of the key things that's having influence, for example, in terms of hiring decisions, investment decisions...”
  —Susan Collins, [23:16]

• On AI in Unexpected Places:
  “I was not too long ago visiting a lumber mill in northern Vermont and learned about how they have been using AI in order to solve sort planks, in part because they were having trouble hiring that skilled labor in that part of the country.”
  —Susan Collins, [37:24]

Key Timestamps

• [04:47] – Susan Collins joins the podcast
• [05:10] – Purpose behind the Boston Fed conference
• [08:07] – Collins on current labor market conditions and monetary policy
• [10:08] – Why prior rate cuts happened and the current stance
• [13:59] – Why so much public Fed speak lately?
• [18:22] – The persistent effect of above-target inflation
• [23:16] – How tariffs impact inflation and business decision-making
• [31:32] – Regional labor shortages and solutions
• [36:01] – Wage growth, labor demand/supply
• [37:24] – AI’s real-world adoption stories
• [40:00] – Policy implications of AI for the Fed mandate
• [43:14] – How Fed policy relates to housing supply
• [46:05] – Monitoring of markets and local finance dynamics

Summary for Listeners

This episode provides an in-depth, candid look at the Fed’s real-time decision-making during a period of extraordinary economic ambiguity—between sticky inflation, tentative labor data, uncertain policy shocks like tariffs, and the transformative potential of AI. Susan Collins is measured and pragmatic; she emphasizes data dependence, scenario planning, and a resilient yet cautious approach. The conversation is highly relevant for anyone trying to understand what might prompt the next policy move and how the Fed evaluates crosscurrents in the real economy. The tone is thoughtful, open, and data-driven, with several memorable anecdotes revealing how macro policy meets main street reality.