Fed gets newest policymaker, as inflation, recession fears mount

(Reuters) – Susan Collins started her job Friday as president of the Federal Reserve Bank of Boston, becoming the first Black woman to lead a regional branch of the U.S. central bank as it faces 40-year-high inflation and mounting fears of recession.

Collins will have her first chance to weigh in on monetary policy in just over three weeks, on July 26-27 when she’ll join the Fed’s 17 other policymakers to decide interest rates.

They are widely expected to deliver another 75-basis-point rate hike, bringing the Fed’s policy rate to a range of 2.25%-2.5% on the way to what they have signaled will likely be around 3.4% by year’s end — up from zero at the start of the year.

Fed Chair Jerome Powell says the Fed’s fight against inflation — running at more than three times the Fed’s 2% target — is “unconditional.” Though it ideally can be won without undermining the current strong labor market, he said earlier this week, the process “is highly likely to involve some pain.”

Friday brought fresh signs of that coming pain, with an index of U.S. factory activity slowing more than expected and an estimate of U.S. economic growth published by the Atlanta Fed turned negative for the most recent quarter.

Still most economists believe U.S. employers continued to add jobs last month, albeit at a slower pace than in recent months, and that the unemployment rate likely held steady at 3.6%, near historic lows.

Collins, an economist and public policy professor, most recently served as provost at the University of Michigan. She succeeds Eric Rosengren, who retired last fall amid an ethics probe into personal trading by Fed officials during the pandemic.

In addition to helping set U.S. interest rates, Collins’ job entails overseeing the Boston Fed’s banking supervision, community outreach, and its lead role at the central bank in research on technology that could be used if the Fed adopts a central bank digital currency.

(Reporting by Ann Saphir; Editing by Alistair Bell)