US Fed's Collins: "It Will Take Long to Achieve 2% Inflation... Current Interest Rate Should Be Maintained"

"Maintain Restrictive Interest Rates Longer to Slow Economic Downturn"

Boston Federal Reserve Bank President Susan Collins stated that it may take a long time for inflation to reach the Federal Reserve's (Fed) target of 2%. This can be seen as a reaffirmation of the Fed officials' stance, including Chairman Jerome Powell, who warned of the possibility of prolonged inflation.

In a speech at the Massachusetts Institute of Technology (MIT) on the 8th (local time), President Collins said, "The recent surprise rise in (economic) activity and inflation suggests a strong need to maintain the current policy until we have greater confidence that inflation is consistently moving toward 2%." Collins does not have voting rights at this year's Federal Open Market Committee (FOMC) meetings.

He explained, "Looking at recent data, I have come to believe that it will take more time than previously thought for inflation to slow down," adding, "At present, progress will take time, and there is a need for recognition and patience that inflation will continue to be uneven." He further added, "I believe maintaining this restrictive level for a longer period will slow the economy."

Last year's inflation progress was driven by commodity prices, but he expects this trend will not continue at the same pace as last year. President Collins mentioned, "For inflation to show progress, a slowdown in demand, especially further easing of core service prices excluding housing costs, is necessary."

Regarding the current monetary policy, he stated it is "moderately restrictive," adding, "The policy has recently become more restrictive than initially thought, and its effects have not yet fully materialized."

President Collins emphasized that the labor market needs to become healthier and that supply and demand should be "adjusted in an orderly manner."

On this day, President Collins' remarks aligned with those of Fed Chairman Jerome Powell and other officials. Earlier, Chairman Powell said at a press conference following the FOMC meeting on the 1st, "It will take longer than expected to gain confidence that inflation is on a sustainable path toward 2%."

Neel Kashkari, President of the Minneapolis Fed, also said the day before, "I think it is likely that we will remain at this level much longer than currently expected or anticipated by the public until we confirm the effects of monetary policy," adding, "While it is not the most likely scenario, we cannot rule out further rate hikes."