Boston Fed President Susan Collins expressed on Wednesday that the timeline for addressing inflation may extend longer than previously anticipated, echoing sentiments shared by other policymakers advocating for maintaining current interest rates.
Speaking at the Sloan School of Management at MIT, Collins highlighted that recent data indicate a prolonged period may be necessary to bring inflation down to target levels. She emphasized that there’s no predetermined course for policy decisions.
Collins pointed out that the supply chain improvements that contributed to a swift cooling of inflation last year might not persist, and she suggested that slower economic growth will be required to reduce demand and, consequently, inflation.
However, despite the challenges, Collins remains optimistic about eventually achieving the Fed’s inflation target of 2%, especially with a healthy job market.
Her sentiments align with those of other Fed officials who have advocated for maintaining current interest rates for an extended period. New York Fed President John Williams emphasized the need for patience in policy adjustments, while Minneapolis Fed President Neel Kashkari suggested that rates may need to remain steady for an extended period, with a possibility of adjustment if inflation stalls near 3%.
These statements follow the recent decision by the Fed’s interest rate-setting committee to keep the benchmark rate unchanged at 5.25%-5.50%, citing a lack of significant progress toward the inflation target.
The committee underscored the importance of gaining greater confidence in the inflation outlook before considering rate adjustments. Despite some improvements, inflation has shown little progress in the first quarter of the year after a decline in the latter half of the previous year.
The committee emphasized the need for sustained progress toward the 2% inflation objective before contemplating any reduction in the target range for interest rates.
