Federal Reserve’s Collins: Patience on Inflation Is Waning, Rates May Need to Stay Higher for Longer

Odaily, April X (Jin Shi) – Federal Reserve Bank of Boston President Susan Collins said on Wednesday that she expects interest rates to remain steady for an extended period and acknowledged that, under certain scenarios, further tightening might be needed to ensure inflation returns to the 2% target. She noted that conventional monetary policy typically “looks through” temporary supply shocks, such as a rise in oil prices. However, given that inflation has been above target for more than five years, she believes patience in curbing price pressures is waning. Collins stated that the current tightening of monetary policy “may need to persist for some time.” She added: “The shock has slightly increased downside risks to economic activity, while the upside risks to inflation have increased further.” At the same time, she indicated that if inflation moderates, the Fed could still cut rates later this year. Collins added, however, that if the conflict persists and leads to further price increases, “I could envision a scenario where tightening is needed to ensure inflation sustainably returns to 2% within a reasonable timeframe.” (Jin Shi)