Boston Fed chief lays out global economic risks, opportunities

Susan Collins of the Boston Fed at podium.

Screen shot Susan M. Collins, president and CEO of the Federal Reserve Bank of Boston, said the global economy faces increasing risks and uncertainties.

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By Renee Cordes

A more volatile and fragmented global economy poses both challenges and opportunities for businesses while clouding the picture for monetary policy makers, according to the head of the Federal Reserve Bank of Boston.

Susan M. Collins, the Boston Fed's president and CEO, told a conference Friday that the world economy faces increasing risks such as those from pandemics, geopolitical flareups, extreme weather events and cybersecurity threats.

At the same time, those risks are inducing significant reconfiguration in trade, capital, labor and technology flows, possibly leading to greater fragmentation, she noted.

“When such risks materialize, they can disrupt supply chains, and, in the process, induce complex dynamics for domestic supply and demand — as demonstrated by the COVID-19 pandemic, Russia’s invasion of Ukraine and recent trade tensions,” she said.

While ever-changing circumstances are putting a strain on supply chains, Collins said that the recent period of prolonged uncertainty coincides with increased investment in automation and AI technology, potentially generating new business opportunities and boosting economic growth.

Fed faces headwinds

Collins, a member of the interest rate-setting Federal Open Market Committee, warned that the “major, transformative and intertwined” forces shaping the economic landscape could spark more volatile business cycles and inflation and play out in the policymaking arena.

That, in turn, "could complicate the Fed’s efforts to maintain price stability and maximum employment, especially if economic shocks in this new environment have a more substantial supply-side component,” she said.

She also warned that a more fragmented global economy could erode financial integration, which could spark higher borrowing costs and affect broader financial conditions.

Collins underscored that her comments do not reflect her near-term policy outlook. Her remarks come less than a month before the next FOMC meeting, scheduled for Dec. 9-10.

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