Susan Collins, president of the Federal Reserve Bank of Boston, speaks during the National Association of Business Economics (NABE) economic policy conference in Washington, DC, US, on Thursday, March 30, 2023.
Ting Shen | Bloomberg | Getty Images
Boston Federal Reserve President Susan Collins expressed support Friday for keeping interest rates elevated as the battle against too-high inflation continues.
In remarks to a banking group in Maine, the central bank official said there’s still the possibility that the Fed will have to raise rates further if economic data doesn’t cooperate.
“I expect rates may have to stay higher, and for longer, than previous projections had suggested, and further tightening is certainly not off the table,” Collins said in prepared remarks. “Policymakers will stay the course to achieve the Fed’s mandate.”
The commentary comes two days after the rate-setting Federal Open Market Committee decided not to raise rates following its two-day meeting. Collins is an FOMC voting member this year. The federal funds rate is currently targeted in a range between 5.25%-5.5%.
While choosing not to raise rates, officials indicated they still see one more increase coming this year, then potentially two cuts in 2024, assuming moves of 0.25 percentage point at a time.
Collins said the recent inflation data has been encouraging though it’s “too soon” to declare victory while core inflation excluding shelter costs remains elevated.
“There are some promising signs that inflation is moderating and the economy rebalancing,” she said. “But progress has not been linear and is not evenly distributed across sectors.”
She also noted that the impacts of monetary policy moves, which have included 11 interest rate increases and a more than $800 billion decrease in the Fed’s bond holdings, may be taking longer to make their way through the economy due to the strong cash positions of consumers and businesses.
However, she said the path to a soft landing for the economy “has widened” and said Fed policy is “well positioned” to achieve a decrease in inflation while not sending the economy into recession.