Despite recent encouraging signs on inflation, Boston Federal Reserve President Susan Collins said Friday that more interest rate hikes may still be needed.
“I understand the tendency to really enjoy good news, and there was some good news in some of the numbers – and I think we need to appreciate that. But I don’t see further tightening off the table,” the central bank official told CNBC’s Steve Liesman during a “Squawk on the Street” interview. “I think the key point is that we really need to stay the course.”
Other Fed officials have said much of the same thing, essentially that inflation is making progress toward the Fed’s 12-month target of 2% but still has a long way to go. Policymakers are worried about repeating the mistakes of the past, when the Fed abandoned its efforts to reduce inflation too soon and ended up paying for it.
This week’s inflation reports showed a slowdown in both consumer and producer prices. However, Collins said the recent data was “noisy.”
“We need to look at the data holistically,” she said. “So [there has been] promising news, which is great. But I remain focused on really taking a comprehensive look at the type of information we’re receiving and assessing in real time what the right thing to do is.”
Markets expect the Fed to raise virtually no further interest rates this cycle. The central bank’s key interest rate is expected to be in a range between 5.25% and 5.5%, the highest in 22 years. Market price forecasts show the Fed will begin cutting in May and cut interest rates by a full percentage by the end of 2024, according to CME Group’s FedWatch measure.
Collins noted progress in stabilizing the labor market and tightening financial conditions, but said it was “important for us to be patient and recognize that.” [we’re] far from declaring victory.
Collins will not be a voting member of the Federal Open Market Committee, which sets interest rates, until 2025.
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