Boston Fed President Susan Collins says she backed last week's quarter-point rate hike, pointing to a rising chance that inflation stays above the Fed's 2% target. She flagged supply shocks, including the US-Israeli war with Iran, as a key driver of the current price pressure.
Boston Federal Reserve President Susan Collins wrote on Tuesday that she supported the central bank's decision last week to raise interest rates in the face of risks that future inflation stays above the 2% target. She made the comments in a LinkedIn post.
Collins cites a growing inflation risk
According to Reuters: "future scenarios in which inflation remains notably above 2%" are now more likely, Collins wrote. She added that with the labor market on better footing, monetary policy can focus on a timely return to price stability after five and a half years of too-high inflation.
A somewhat more restrictive federal funds rate, she said, will help ensure inflation durably returns to target. Collins is not a voting member of the rate-setting Federal Open Market Committee this year, and she did not say in her post whether she wants rates to rise again.
Fed raised rates by a quarter point last week
The Fed raised its interest rate target by a quarter of a percentage point to the 3.75%-4.00% range last week in an effort to curb price pressures. Policymakers also penciled in another rate hike before the year is out, though Fed Chairman Kevin Warsh, who is averse to giving guidance on future policy, did not affirm that projection.
Much of the upward drift in price pressures, however, stems from supply shocks such as the US-Israeli war with Iran, which are hard to counter with tighter monetary policy. Even so, the persistence of inflation above the 2% target has pushed Fed officials away from looking through what would once have been viewed as transient hits to inflation.
Source: Investing.com
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