In an exclusive interview with Yahoo Finance, Federal Reserve Bank of Boston President and CEO Susan M. Collins says she "could imagine scenarios" that would be consistent with both one or two rate cuts this year.

Overall, Collins says there is "evidence the economy is coming into better balance," and she is "optimistic" the Fed will be able to bring down inflation and maintain a healthy labor market.

"It's gonna take some time" for inflation to reach the Fed's 2% target, Collins tells Yahoo Finance's Jennifer Schonberger, but "things are very volatile. You get some welcome news and then there's challenging news. So I think it's really important not to overreact to what has been encouraging." Collins points to recent reads on CPI and PPI, arguing they are "consistent with an economy that, in an orderly way, is becoming better aligned," but she cautions that monthly data has been "really volatile" and patience will be necessary.

Collins emphasizes the importance of looking at a "wide range of data" when trying to figure out if inflation is truly on a downward path. She points to shelter inflation and some services inflation are going to be stickier than other components.

Collins says there "are very plausible scenarios" that would result in the Fed lowering rates later this year. She also notes that there are risks to the Fed not lowering rates soon enough, saying it's something she is "carefully" watching for signs of.

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This post was written by Stephanie Mikulich.