The Star Malaysia - StarBiz

Collins’ view on rate hikes unchanged by recent data


“As rates get higher, the concerns that we might go too high do increase.” Susan Collins

NEW YORK: Federal Reserve (Fed) Bank of Boston president Susan Collins reiterated her view that options are open for the size of policymake­rs’ December interest-rate increase, including the possibilit­y of a 75 basis-point move.

Collins also repeated that more hikes are needed to tame inflation and said her view on how high rates will need to go was unaffected by recent economic reports.

“We are starting to see some promising signs,” although there is still no “clear, consistent evidence that the overall inflation rate is coming down at this point,” Collins said in an interview with CNBC television. “There’s more we need to do.”

The Boston Fed chief, who joined the central bank in July and is a voter on the rate-setting panel through year-end, said she hadn’t made a decision on the December meeting.

“Historical­ly, 50 was viewed as a large increase and we’re in a range where most people” see the Fed as in “tightening” territory, she said.

“But 75 still is on the table, I think it’s important to say that as well.”

Collins was speaking just over a week after Labour Department data showed that consumer-price gains softened in October.

She told reporters Friday evening that while it made sense for the Fed to move rates up quickly in the beginning, “from my perspectiv­e it is a different phase. And I really am focused on how high” the benchmark ought to go.

“As rates get higher, the concerns that we might go too high do increase,” she said. At the same time, it’s important to avoid high inflation becoming embedded in price expectatio­ns, she said.

Fed officials lifted interest rates by 75 basis points for the fourth straight time on Nov 2, bringing the target on the benchmark rate to a range of 3.75% to 4%.

Several policymake­rs have signalled they may consider a 50 basis-point increase when they meet in mid-december, depending on what happens with the economy.

“I expect this will require additional increases in the federal funds rate, followed by a period of holding rates at a sufficient­ly restrictiv­e level for some time,” Collins said in earlier remarks at a conference hosted by the Boston Fed.

“The latest data have not reduced my sense of what sufficient­ly restrictiv­e may mean, nor my resolve.”

Collins reiterated in her remarks that she remains “optimistic that there is a pathway to reestablis­hing price stability with a labour market slowdown that entails only a modest rise in the unemployme­nt rate.”

She was speaking at a conference dedicated to examining shifts in the labour market and the potential impact of long-run implicatio­ns from the pandemic.

Newspapers in English

Newspapers from Malaysia