Observations on the Economy’s Performance and Outlook

By Susan M. Collins

February 28, 2024

Tuck School of Business at Dartmouth College

Full-text Speech (pdf) Figures (pdf) more

Takeaways from Boston Fed President Susan M. Collins’ February 28, 2024 Remarks

The U.S. economy overall performed remarkably well in 2023: inflation slowed notably, while job growth and output growth remained quite strong. Importantly, the pandemic recovery has been unusually equitable, with employment gains having been broadly shared across racial and ethnic groups.
Recent economic data releases highlight that progress toward achieving the Fed’s mandated goals—price stability and maximum employment—could continue to be bumpy. And with the volatility of monthly inflation remaining elevated, it is important not to overreact to individual data readings. More time is needed to discern whether the economy is sustainably on a path to price stability, amid a healthy labor market.
Collins notes she will need to see more evidence that the disinflationary process will continue before starting to carefully normalize policy—however expecting all of the data to speak uniformly is too high a bar. Some of the factors Collins plans to consider in assessing progress toward the Fed’s dual mandate goals include inflation expectations remaining well anchored, as well as an orderly moderation in labor demand. She also wants to see continued evidence that wage growth is not adding inflationary pressures, consistent with the recent work by Boston Fed economists.
Collins also wants to see continued declines in housing inflation and non-shelter services inflation—the two subcomponents of inflation that have been stickier and are taking longer to return to pre-pandemic levels. The focus on inflation components is not about adding additional objectives—the Fed’s target is 2 percent year-over-year growth of total PCE prices—but rather about gaining greater confidence in the overall inflation outlook.
Still, in Collins’ view, the threat of inflation settling persistently above the Committee’s 2 percent target has receded, and risks to the economy overall are moving into better balance. However, a durable return to 2 percent inflation will likely require demand growing at a more moderate pace this year. Collins sees the current stance of monetary policy as consistent with achieving this outcome. And while not on a preset path, she believes it will likely become appropriate to begin easing policy later this year.
Collins also notes that overall, the strength of an economy has many dimensions. In this regard, the Federal Reserve is involved in a breadth of activities to support a vibrant economy that works for all: monetary policymaking, economic research, bank supervision, infrastructure and services for the financial system, and supporting collaborations that expand prospects for progress in low- and middle-income communities.