Despite recent encouraging signs on inflation, Boston Federal Reserve President Susan Collins said Friday that more interest rate hikes may still be needed.
“I understand the tendency to really enjoy good news, and there was some good news in some of the numbers – and I think we have to appreciate that. But I don’t see any further consolidation of the table,” the central bank official. told CNBC’s Steve Liesman during a “Squawk on the Street” interview. “I think the key point is that we have to really stay the course.”
Other Fed officials have said much of the same, essentially that inflation is showing progress toward the Fed’s 2% 12-month target, but still has a way to go. Policymakers fear repeating the mistakes of the past, where the Fed stopped too soon in efforts to lower inflation and ended up paying for it.
Inflation reports this week showed a slow pace in both consumers and producers. However, Collins said recent data was “noisy”.
“We have to look at the data holistically,” she said. “So (there’s been) promising news, which is great. But I’m staying focused on really looking at the kind of full information we’re getting and making assessments in real time on the right thing.”
Markets believe there is almost no chance the Fed will hike during this cycle. The reference lending rate of the central bank is aimed at a range between 5.25%-5.5%, the highest in 22 years. Market prices projects the Fed will begin cutting in May and cut the fed funds rate by a full percentage point by the end of 2024, according to the CME Group’s FedWatch gauge.
Collins noted the progress made in stabilizing the labor market and tightening financial conditions, but said it was “important that we be patient and recognize that (we) are far from declaring victory.”
Collins will not be a voting member on the caretaker Federal Open Market Committee until 2025.