Boston Fed Chair Susan Collins, who votes on the Federal Open Market Committee (FOMC) this year, said on Friday (4th) that monetary policy is entering a new phase despite her support for rising interest rates. interest to reduce inflation. at this stage, while officials need to understand how high they need to be to keep inflation in check. However, she didn’t rule out the possibility of continuing to raise interest rates by 3 yards (75 basis points).
Collins, speaking at a virtual event at the Brookings Institution, said now is the time to shift focus from the pace or pace of rate hikes to the magnitude of rate hikes, in other words, now to increase. interest are needed to adequately contain demand and reduce inflation.
He believes that with interest rates currently in a tight range, monetary policy is entering a new phase that may require smaller rate adjustments as policymakers strike a balance between containing inflation and avoiding the risk of causing a recession excessive. the hike is still one of the Fed’s options.
“In considering how to achieve the level of funding rate at which the Committee deems appropriate to maintain policy, options for policy action must be considered, including three-yard rate hikes and smaller rate hikes,” Collins said. . Also noting that a 2-yard (50 basis point) rate hike was considered a big move in the past.
As for the final rate, Collins believes it is too early to report how much interest rates should rise and the possibility of future rate hikes depends on upcoming economic data.
Fed Chairman Jerome Powell said at a news conference a few days ago that officials may soon take steps to raise interest rates slightly and ultimately raise interest rates to higher-than-expected levels. Fed officials expect rates to be 4.4% by the end of this year and 4.6% in 2023, according to the Fed officials’ median forecast in September.
During the interview, Collins acknowledged that as the Fed continues to raise interest rates, the risk of an excessive tightening has grown and said that achieving the goal of restoring price stability would not require a sharp slowdown in the price. economy. He sees the Fed as increasingly important in balancing inflation with avoiding recession.
