MNI: Fed's Collins Says Further Tightening Could Be Warranted

Boston Fed President Susan Collins said Wednesday further Fed tightening could be warranted, but added that she expects to see slowing growth by the end of this year and throughout 2024.

"While we may be near, or even at, the peak for policy rates, further tightening could be warranted, depending on the incoming data," she said in prepared remarks. "I expect we’ll need to hold rates at restrictive levels for some time."

The Boston Fed chief said she is seeing some signs of moderation in the economy, but demand continues to outpace supply, creating price pressures. Wage growth also remains elevated in the current high inflation environment. "Overall, then, rebalancing demand and supply in the labor market has some way to go."

(See: MNI INTERVIEW: Fed Probably Needs A Bit More Tightening-Aikman)

Collins also suggested monetary policy lags may be longer. "In particular, policy tightening has occurred amidst sound business and household fundamentals, compared to previous hiking cycles – likely implying a longer time for tighter credit conditions to work through the economy," she said.

Monetary policy may take longer than normal to affect the broader economy, she told the New England Council. "But given that policy is clearly in restrictive territory, I do expect to see slowing growth by the end of this year and throughout 2024."