First impressions are important, and Susan M. Collins made quite a good one on Monday in her first public appearance since taking over as president of the Federal Reserve Bank of Boston in July.
She avoided Fedspeak as she discussed in clear terms the difficult challenge facing regulators as they attempt to tame inflation without causing a deep recession. She didn’t sugarcoat the pain ahead for Americans in the form of steeper borrowing costs, slower economic growth, and higher unemployment.
And she didn’t succumb to pessimism despite the dire short-term outlook.
“There is some apprehension about the possibility of a significant downturn,” Collins said at an event sponsored by the Greater Boston Chamber of Commerce. “I do believe the goal, which I share with my [Fed] colleagues, of a more modest slowdown, while challenging, is achievable.”
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In holding on to the possibility of a “soft landing,” Collins struck a slightly more optimistic tone than Fed chair Jerome Powell did last Wednesday after central bank officials approved their third straight supersize rate increase, and indicated additional hikes would come later this year. Powell said the Fed would do whatever is necessary to achieve “price stability” — that is, bring down inflation to its 2 percent goal.
“We have always understood that restoring price stability while achieving . . . a soft landing would be very challenging and we don’t know, no one knows, whether this process will lead to a recession or if so, how significant that recession would be,” Powell said.
The Fed has raised its benchmark rate this year at the fastest pace since the early 1980s with the aim of bringing demand for goods, services, and workers back in line with supply. Inflation is running anywhere from two to three times the Fed’s target, depending on which measure of consumer prices is used.
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New economic projections released by Fed policy makers last week were far gloomier than their June outlook. They forecast a bigger rise in the jobless rate, and barely any economic growth this year.
Collins is a voting member of the Fed’s rate-setting committee this year, she backed the rate increases approved in July and earlier this month, and said further hikes would be needed.
But in her comments she cited several reasons why a painful recession might be avoided.
Household and business finances are healthier than they were in previous periods when the Fed was raising rates, she said, so spending might not fall as dramatically. Employers are struggling to find workers, not looking to jettison them, which could limit increases in unemployment.
”It is quite likely that inflation is near peaking and perhaps may have peaked already,” she said in response to a question from James Rooney, president of the Greater Boston Chamber, who interviewed Collins following her formal remarks.
However, she also pointed to risks facing the economy.
“A significant economic or geopolitical event could push our economy into a recession as policy tightens further,” she said. “Moreover, calibrating policy in these circumstances will be complicated by the fact that some effects of monetary policy work with a lag.”
Collins, 63, is a Harvard- and MIT-trained economist, and is the first woman of color selected to lead one of the 12 regional Fed branches since the central bank system was created in 1914.
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She joined the Boston Fed from the University of Michigan, where she had been provost and executive vice president for academic affairs since 2020. She arrived at the university in 2007 and served for a decade as dean of its Gerald R. Ford School of Public Policy before returning to teaching.
The Fed has been criticized by some progressives for being too quick to sacrifice jobs in its fight against inflation. Blue-collar workers, especially those at the lower end of the pay ladder, will be hit harder than more-affluent professions.
But Collins argued, like Powell has done repeatedly, that getting prices under control is imperative.
“Inflation is just clearly too high with rapidly rising prices for necessities, like food, housing and transportation,” she said. “And that actually disproportionately affects the most vulnerable.”
I’ve made clear my high regard for the previous Boston Fed president, Eric Rosengren, who retired amid an unfortunate flap over his investment trading.
As I wrote when he stepped down a year ago, Rosengren was a calm but persistent advocate for enlightened economic stewardship, and he pushed Fed officials to understand the impact of their decisions on people struggling against systemic wealth inequality and racism.
Collins said the Boston Fed remained committed to understanding the racial wealth gap and helping address it.
We are still getting to know the new Boston Fed boss. But I’m betting the more we see of her, the more we will admire her, too.
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Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.