In 2022, Susan Collins became the President of the Boston Federal Reserve. Previously, she spent time at Harvard University, Georgetown University and the University of Michigan as an administrator and economics professor. The Dartmouth spoke with Collins about her past experiences in academia and monetary policy, her perspective on America’s current economic position and current Boston Fed initiatives.
What are some specific initiatives at the Boston Fed that you’re working on right now?
SC: Most people really know very little about the breadth of what the Federal Reserve does. I like to say that our overarching mission is a vibrant economy that works for everyone, not just for some people. We have a mandate from Congress that focuses on price stability and maximum employment — those work hand in hand.
In addition to all the work we do with monetary policy, we have a number of other initiatives. Our research department works on everything from inflation dynamics to the opioid crisis. And that impacts communities and our workforce in a variety of different ways.
We have a community and economic development department that is very focused on the vibrancy of low and moderate income communities across my district. One of the significant initiatives they have is something I mentioned before called Working Places, that now has 30 sites across five states that work on trying to bring local leaders together to work collaboratively in order to understand some of the challenges and develop solutions. And again, it’s based on research.
We recently launched, as part of payments innovation, an instant payments infrastructure. It’s called FedNow and Boston actually led that work, which was across the whole Federal Reserve System. Ultimately, we hope that will mean payments from your bank directly, as opposed to going through Venmo which will enable many individuals to avoid late fees and manage businesses’ just-in-time payments.
How does teaching economics compare to working in economic policy? Do you feel that there are certain restrictions you face as a Federal Open Market Committee (FOMC) member that you were not subject to as a professor?
SC: I have been an educator and in academia for almost all of my career, and it was only 20 months ago that I moved into the Federal Reserve position. Although I had been on the Board of Directors, I knew a lot about it.
I would say that as an academic, or in higher education, I actually did three sets of things that interacted in different ways. One of them was teaching and educating, which was one of my very favorite parts of the job. I also was a macroeconomic researcher. Those parts of being a professor are pretty well understood. I always had an interest in the policy side and in trying to help make lives better, and as I moved on in my career, I became more of a leader in academic administration and in an organization with a public mission.
I actually think that what I do now as President of the Boston Fed has all of those. I am leading a significant and complex organization with a big public mission. I am very involved in macroeconomic policy. The Fed has a huge impact on people’s lives and trying to do the best we can is important to me. I see an educating piece of it as well, though not students necessarily. From my perspective, that actually is a different balance. When I was Provost, I spent less time as a macroeconomist, and I missed that. And now I have more time to do macroeconomics, which was a lot of my career. And it balances in a bit of a different way.
Over the last couple of years, the Fed has managed to bring down inflation without significantly increasing unemployment. What differences in monetary theory do you think contributed to this more successful disinflation, compared with the inflation of the 1970s?
SC: Yeah, let me say a couple things with that. First of all, while we have made really good progress, we're not all the way there yet. We are still focused on bringing inflation back to 2% in a reasonable amount of time. And you're right, one of the things that was widely expected based on historical experience was that in order to successfully bring inflation down, we would need to see unemployment rates rising. And this is not what has happened.
A lot of that has come from supply developments. Strong growth that is driven by positive supply developments does not cause inflationary pressures, and is not something that the Federal Reserve would respond to. And so that’s a very different dynamic from what we have seen before. This time around we went into this period of high inflation with households and firms’ balance sheets are much stronger than other cycles when the Fed has had to put some restraint on the economy. That has really provided some resilience for households and firms because they are less interest-sensitive, which is part of why demand has remained as strong as it has.
In New England, what are some of the greatest challenges that you face when attempting to achieve maximum employment and price stability as well as financial well-being for everyone?
SC: I do spend quite a bit of time talking to people who are participating in the economy. Some of that is through visits, so I make sure I visit at least once if not more, all the states in our district. I’m talking with folks in Boston as well. A lot of the information that we get is from the statistics, and a lot of it is from all of those conversations.
The thing that I have heard more about is housing challenges. That’s a national, significant issue that people are grappling with. It gets particularly acute in our region, in part because the inventory has been quite low. It’s not surprising in a big, vibrant city like Boston that housing is super expensive and there are supply limitations. But I also hear about it in small cities, I hear about it in rural areas. As major employers, you cannot hire people who cannot find a place to live. Housing is a significant challenge. It’s a short-term challenge and it’s a medium to longer-term challenge.
I also hear a lot about childcare. As a parent, I remember how challenging it was when my kids were little. That has gotten worse and it was really exacerbated by the pandemic. I see it as a major economic issue, because a barrier to affordable quality child care is a barrier to participating in the workforce and in the economy. It is also important in terms of development, those are our future workers and future employees. We have quite a bit of work underway to understand child care challenges and how to grapple with them.
What advice would you have for Dartmouth students who want to get involved in monetary policy as a career?
SC: Having been an economics major and taught economics, both in an economics department and a public policy school for many years, I think it’s a fabulous major. It’s a grounding that helps people learn how to think analytically and that can be applied in a wide range of things.
Monetary policy is a fascinating area. I strongly encourage people to consider it and I want to emphasize that most people’s careers involve a range of different things. I’m focused on monetary policy now — it’s something that I was interested in over time. I also had a lot of my career focused on economic growth and living standards, and how to, in a durable way, foster long-term growth that could raise living standards. That’s not unrelated to monetary policy, but it’s distinct.
The point I’m making is that an economics background can benefit many people in different directions. As far as monetary policy goes, people should understand that the central bank has a public mission. It is a public service organization. As part of monetary policy, we look more holistically at aspects of the economy. And therefore, it’s perhaps a bit broader a career path that some people don’t realize.
It’s those different perspectives, working together with both the modelers and the data geeks, which I am one, and also folks who are looking more qualitatively. All of that comes together in terms of developing an understanding that helps us do the best we can, with a little bit of humility, to make monetary policy.
I strongly encourage students to also follow their passions and invest in themselves.
This interview has been edited and condensed for clarity and length.
