A senior Federal Reserve official hopes the central bank will hike rates by another quarter of a percentage point in the fight against high inflation, despite lingering concerns about the stability of the banking system. says there is.
Boston Federal Reserve Governor Susan Collins said on Thursday that national inflation remained too high, arguing that “more needs to be done” to return to the central bank’s 2% target.
He backed the Federal Reserve’s (Fed) forecast for this month, saying, “I’m now conservatively anticipating some additional policy tightening and then maintaining it until the end of the year.” . cents this year.
The benchmark rate is now hovering between 4.75% and 5% after the central bank’s decision last week to proceed with a quarter-point rate hike despite recent turmoil involving the local banking sector.
Speaking at a conference hosted by the National Business Economics Association, Collins said of the Fed’s latest forecast, “the risk is that monetary policy will not be restrictive enough to keep inflation down, and that more than is necessary to deal with elevated conditions.” We are reasonably balancing the risk of slowing activity in the future.” price pressure”.
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At a press conference following the latest interest rate decision, Fed Chairman Jay Powell warned of a potential credit crunch as lenders withdraw — a view Collins repeated Thursday.
She said banks were likely to “take a more conservative outlook and tighten lending standards, helping to slow the economy and lower inflationary pressures.”
“These developments could partially offset the need for more rate hikes,” Collins added. Powell said the recent tightening in financial conditions could be “equal to or better than rate hikes.” In a discussion that followed her remarks, Collins said she had planned to raise her forecast for Federal Funds rates this year before the Silicon Valley bank implosion.
Collins on Thursday reiterated his belief that the Fed can achieve a so-called “soft landing” and avoid a recession in which higher borrowing costs dampen demand.
“We are fully aware of the many risks and uncertainties facing the economy, including the risk of a self-fulfilling loss of business and consumer confidence,” she said. .
“But I also mentioned reasons to be optimistic: the economy has proven more resilient to tighter financial conditions than before, including relatively strong business and household fundamentals. may be,” she said.
