Boston Fed President Collins said that in order to achieve the 2% inflation target, the Federal Reserve may further raise interest rates in the future, and borrowing costs may also need to remain at a higher level for longer.
Source: Boston Fed
"I expect that interest rates may have to remain higher and for longer than previously forecast," Collins said in a speech at the Maine Bankers Association's annual meeting. "In addition, the option of further tightening is certainly not off the table." outer."
On Wednesday, the Federal Reserve announced that it would "stand still" and maintain the target range of the federal funds rate at 5.25% to 5.50%. However, in the "dot plot", most central bank officials believe there will be another 25 basis point interest rate hike this year, and their forecast for next year's interest rate cut is only about 50 basis points.
These data all suggest that borrowing costs will remain high for longer than the dot plot of previous decisions. In response, Collins said she "fully" supports the guidance provided by Fed officials in their quarterly economic forecasts and said policy at this stage will require "considerable patience."
Since March 2022, the Federal Reserve has implemented 11 intensive interest rate hikes, raising interest rates from near zero to 5.25% to 5.5%, the highest level in 22 years. Federal Reserve Chairman Jerome Powell also said at a press conference that the bank would proceed with caution, but stressed that controlling inflation "still has a long way to go."
Collins said that U.S. inflation has indeed slowed, but the progress has been uneven and more time is needed to ensure that price increases are on a steadily declining track. Demand is likely to cool as households spend their savings and debt market activity picks up.
At the same time, Federal Reserve Governor Michelle Bowman spoke more directly at another event. She favors continuing to raise interest rates, and possibly more than once, because she believes the Fed is not making enough progress in bringing inflation down to its 2% target.
It is worth mentioning that Bowman and Collins are both voting committee members of this year’s Federal Open Market Committee (FOMC).
