“Absolutely ready to step in”—Boston Fed’s Susan Collins reassures markets as $29T Treasuries and stocks wobble under Trump’s global tariff shock.
Federal Reserve officials are preparing contingency tools to stabilize financial markets if volatility deepens, Boston Fed President Susan Collins told the FT in a rare direct warning to Wall Street. While emergency rate cuts are not imminent, Collins emphasized that the Fed stands “absolutely ready” to intervene should market functioning deteriorate.
Her comments follow a brutal week where Trump’s trade war escalation shook both equities and the U.S. Treasury market, now valued at over $29 trillion.
Key Takeaways:
- Markets are still “functional”, Collins said, but the Fed is closely monitoring liquidity conditions.
- She warned that inflation could remain above 3% in 2025, complicating the case for near-term rate cuts.
- NY Fed President John Williams also chimed in, cautioning that tariffs could spike joblessness and dampen growth if not managed carefully.
The Backdrop:
- Global investors have dumped U.S. assets in recent days after Trump announced tariffs as high as 145%, triggering retaliations from China and others.
- Bond yields have swung wildly, and stocks briefly entered correction territory before rebounding after Trump’s surprise tariff pause on non-China countries.
What It Means:
- The Fed’s dual message is clear: rates may not fall soon, but tools like liquidity injections and balance sheet adjustments are ready if needed.
- Analysts say the Fed is trying to walk a tightrope between inflation control and market rescue—especially with financial stability now in play.
With Trump’s tariffs injecting chaos into global markets, the Fed is quietly preparing its toolkit. While inflation keeps rate cuts off the table—for now—Wall Street just got its first signal that the Fed is watching… and willing.
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