May 25, 2023
Collins Says Fed at or Near Rate-Pause Point as Inflation Cools
(Bloomberg) -- Federal Reserve Bank of Boston President Susan Collins said the US central bank may have reached, or be approaching, the point at which it can pause interest-rate increases.
“While inflation is still too high, there are some promising signs of moderation,” Collins said Thursday in remarks prepared for an event in Rhode Island. “I believe we may be at, or near, the point where monetary policy can pause raising interest rates.”
Collins, who doesn’t vote on the Federal Open Market Committee this year, said officials should approach policy on a meeting-by-meeting basis and take a comprehensive assessment of information available at the time.
Policymakers pivoted to this approach, following 14 months of well-telegraphed and aggressive rate increases, after their meeting earlier this month.
The minutes of that May 2-3 gathering, and speaking appearances in the weeks since, showed Fed officials are split on whether or not to stop hiking at their upcoming June 13-14 meeting. Some argue that the central bank should see how its policy so far is affecting the economy, while others say more is needed to bring down still-high prices.
“I do think it’s going to take some time, some of the declines we’ve seen so far in inflation have been a little slower than I might have anticipated but we are starting to see some positive movements,” Collins said in a question-and-answer session following her speech.
Some officials have argued that even if the Fed does pause next month, more policy tightening later in the year will likely be needed to bring down inflation more meaningfully. Collins did not comment on her views about this option in her remarks.
A report earlier this month showed a slight ebbing in the core consumer price index, which strips out food and energy. The gauge rose 5.5% in April from a year ago, after a 5.6% increase the prior month. Personal consumption expenditures data, the Fed’s preferred inflation benchmark, is due out on Friday.
“Low, predictable inflation is needed for fostering conditions that promote a vibrant, resilient, and inclusive economy – and for maximum employment that is sustainable over time,” Collins said. “This is a key reason why it is so important for us to remain resolute in bringing inflation back down to the 2% target in a reasonable amount of time.”
(Updates with Collins comments during post-speech discussion in sixth paragraph.)
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