Boston Fed President Susan Collins, who this year votes on the Federal Open Market Committee (FOMC), said on Friday (4th) that monetary policy is entering a new phase despite his support for raising interest rates to reduce inflation. at the moment, while officials need to figure out how high they need to be to keep inflation under control. However, he did not 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 the focus from the speed or pace of rate hikes to the size of rate hikes, in other words, now to raise the interest rates needed. adequately curb demand and reduce inflation.
She believes that with interest rates currently in a restrictive 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 triggering a recession. too much a hike is still one of the Fed’s options.
“When considering how to reach the level of funds rate that the Committee considers appropriate to maintain policy, it is necessary to consider options for policy implementation, including rate increases of three yards and smaller rate increases,” said Collins. Also drawing attention to the fact that a rate increase of 2 yards (50 basis points) was considered a big step in the past.
As for the cut-off rate, Collins believes it is too early to indicate how high interest rates should go, and the possibility of future rate hikes depends on upcoming economic data.
Fed Chairman Jerome Powell said in a news conference a few days ago that officials could soon take measures to raise interest rates slightly, and eventually raise interest rates to levels higher than previously expected. Fed officials forecast rates of 4.4 percent by the end of this year and 4.6 percent in 2023, according to the median forecast from Fed officials in September.
During the conversation, Collins acknowledged that as the Fed continues to raise interest rates, the risk of over-tightening has increased, and argued that achieving the goal of restoring price stability would not require a sudden slowdown in the economy. She sees the Fed as increasingly important in balancing inflation with avoiding recession.