Boston Federal Reserve Bank President Susan Collins said policymakers need to keep raising interest rates to get inflation under control, though exactly how much higher borrowing costs need to go will hinge on incoming data.
(Bloomberg) — Boston Federal Reserve Bank President Susan Collins said policymakers need to keep raising interest rates to get inflation under control, though exactly how much higher borrowing costs need to go will hinge on incoming data.
“I do believe that we will need to do some additional rate increases and exactly what the right amount is really needs to be dependent on a holistic review of the information that we receive,” Collins said during a radio interview with Vermont Public that was recorded Wednesday and shared on Thursday by the media outlet.
“And then I do believe that it will be important to hold there for some time because it takes a while for the effects of tighter financial conditions to work through the economy.”
Fed officials lifted interest rates by 25 basis points last month, bringing the target on their benchmark rate to a range of 4.5% to 4.75%. That was a moderation from a 50 basis-point increase in December and four 75 basis-point rate hikes rolled out last year.
Policymakers in December saw interest rates rising to 5.1% this year, according to median projections released by Fed officials at that meeting. US central bankers are set to release fresh projections when they meet again on March 21-22.
Investors are raising their bets for how high the central bank will need to take rates to quell inflation after a string of reports pointed to an economy proving surprisingly resilient to the Fed’s aggressive tightening campaign. Markets now see rates peaking at nearly 5.5% this year, according to pricing in futures contracts.
Collins said last week that the Fed has to keep raising rates to get them to a sufficiently restrictive level and it may need to hold them there for an “extended” period of time to get inflation down to the central bank’s 2% target. The Boston Fed chief does not vote on monetary policy decisions this year.
The Fed official said during the interview with Vermont Public that while there have been indications of progress, inflation remains elevated.
“We’ve seen some early signs that wage and price pressures might be slowing,” she said. “But we’ve also seen some evidence that high inflation” remains, particularly in some areas of services.
(Updates with more Collins remarks and market pricing starting in the fourth paragraph)
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