Boston Fed President Susan Collins said she could support a rate hike in September if inflation fails to ease enough. She pointed to persistent cost pressures across the Northeast and said current policy is only slightly restrictive.
Boston Fed President Susan Collins said she could support a rate increase in September if inflation fails to ease sufficiently, adding a hawkish voice to the Fed's policy debate. Speaking to the Financial Times on Wednesday, Collins said she would be prepared to raise rates if economic conditions in the coming months require tighter policy. According to the Financial Times: "I would be prepared to raise rates in that context." She backed keeping rates unchanged in July and currently views monetary policy as only "slightly restrictive."
Inflation squeezes households across the Northeast
Collins said inflation has continued to squeeze businesses and households across the US Northeast, with price concerns surfacing in nearly every conversation with firms. Pressure is particularly acute for lower- and middle-income households, she said, with some struggling to make ends meet as elevated energy costs add to broader affordability problems. Collins tied the persistent cost pressures partly to the Iran war. She expects inflation to continue declining gradually, but stressed that price growth has remained above the Fed's 2% target for more than five years, leaving policymakers little room for complacency.
Fed faces a harder September decision
Collins is not currently a voting member of the FOMC, but her comments add to the Fed's increasingly difficult September trade-off. Recent labor-market weakness has strengthened the case for holding rates. However, persistent inflation and renewed energy pressure could still justify further tightening if upcoming data disappoint.
Source: ActionForex
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