Boston Fed President Susan Collins said that with the labor market holding firm without intensifying price pressures, a gradual path of rate increases would be appropriate for bringing inflation down.
"I see price pressures broadening and they have been high for a long time," Collins told reporters in Boston on Saturday. "A steady, gradual path seems appropriate to me right now, but I am open-minded." Collins reiterated that the direction of monetary policy is clear, but again did not hint at how quickly the Fed needs to raise rates or how high it will go.
The Boston Fed chief said Friday that further tightening would be needed "before long." After the Fed left rates unchanged in the 3.75%-4% range last month, officials appear ready to raise rates again at their next meeting in early December in Washington. Based on federal funds futures pricing, investors expect hikes in both December and January, plus another in March or April.
Collins, who is not a monetary policy voter this year, said consumer expectations for future inflation remain near the Fed's 2% target, while wage gains are concentrated in parts of the labor market, especially those related to skilled workers.
"I think the most likely scenario is that healthy consumer demand continues, as does business investment, and as the policy path tightens somewhat, we can bring inflation down in a reasonable time without major changes in the labor market," she said Saturday. However, there are also scenarios in which inflation remains higher than expected if demand pressures are more severe, wage gains broaden, or the economy suffers additional shocks.
Collins also said she is watching rising goods prices, saying prices "have gone up somewhat." "I also recognize that we still face continued uncertainty, and there are scenarios in which inflation could prove more persistent," she said.
In recent remarks, Fed policymakers have expressed differing views on the appropriate pace and magnitude of rate hikes. One group of officials advocates gradual increases, while another suggests more rapid action is needed. Fed Governor Christopher Waller has even argued for a 50 basis point hike.
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