Fed’s Susan Collins says further rate hikes can’t be taken off the table yet

Despite recent encouraging signs on inflation, Boston Federal Reserve President Susan Collins said Friday that further interest rate hikes may still be necessary.

“I understand the tendency to really appreciate good news, and there has been some good news in some of the numbers – and I think we have to appreciate that. But I don’t see further strengthening on the table,” said the head of the central bank. said CNBC’s Steve Liesman during a “Squawk on the Street” interview. “I think the key point is we really need to stay the course.”

Other Fed officials have said much the same thing, essentially that inflation is moving toward the Fed’s 12-month 2% target, but that there is still a way to go. Policymakers are reluctant to repeat past mistakes, where the Fed abandoned its efforts to reduce inflation too soon and ended up paying the price.

Inflation reports this week showed a slowdown in consumer and producer prices. However, Collins said the recent data was “noisy.”

“We need to look at the data holistically,” she said. “So there’s been some promising news, which is great. But I remain focused on looking at what kind of comprehensive information we’re getting and evaluating in real time what’s the right thing to do.”

Markets believe there is virtually no chance the Fed will raise rates again this cycle. The central bank’s benchmark borrowing rate is targeted at a range between 5.25% and 5.5%, the highest in 22 years. Market prices predict the Fed will begin cutting rates in May and cut the federal funds rate by a full percentage by the end of 2024, according to CME Group’s FedWatch indicator.

Collins highlighted progress in stabilizing the labor market and tightening financial conditions, but said it was “important for us to be patient and recognize that (we are) far from declaring victory.”

Collins will not be a voting member of the Federal Free Market Interest Rate Setting Committee until 2025.