Fed's Collins: May Need to Hike Rates Again This Year

Odaily reports: Boston Fed President Collins said interest rates may need to be raised further before the end of this year to curb inflation. Regarding whether further rate hikes are needed and the timing of such hikes, she said the judgment will depend on upcoming economic data. Collins expects the U.S. economy to continue growing and the labor market to remain near full employment. She said: "In this scenario, as continued efficiency gains support the balance between demand and supply and help cool inflation, inflation will gradually fall back to 2%." But she warned that two other scenarios are almost equally likely. AI demand could drive an investment boom larger than expected, further boosting household spending, overheating the labor market, and keeping inflation persistently above the Fed's target. In addition, price pressures from tariffs and energy prices, especially if the Iran war continues, could prolong inflation challenges. Collins said: "It is important to observe whether high inflation remains mainly confined to energy and AI infrastructure-related sectors while price growth continues to slow in other areas, or whether signs of broadening price pressures are emerging." (Jinshi)