Fed's Collins backs further rate rises as inflation pressures broaden
Boston Federal Reserve President Susan Collins said on Friday that tighter monetary policy is on the way because inflation remains high, and the path may now be firmer than she had expected. "I think it's clear the direction that monetary policy needs to go and I would think that soon some additional firming, tightening of policy is appropriate," she said in an interview with Bloomberg Television.
Collins pointed to recent inflation data that has "not been particularly friendly" and shows signs that price pressures are broadening across the economy. "I think it may be that a bit of a tighter policy path than I had penciled in a couple of months ago might be appropriate," she said.
The Fed's benchmark rate currently sits in the 3.75%-4.00% range, and the central bank is widely expected to raise it at its December 8-9 policy meeting. Traders and investors expect a quarter-percentage-point increase, though Fed Governor Christopher Waller suggested earlier this week that a half-percentage-point move was possible. Markets also expect another hike in January.
Collins declined to commit to a pace or a peak. "I don't want to get ahead in terms of how high we should go or how fast," she said, describing her "best-case scenario" as "a careful adjustment of policy", while acknowledging "there are scenarios where I might think about that somewhat differently."
Speaking at a housing conference hosted by her regional Fed bank, Collins said delivering price stability is key to a healthy housing sector, even if tighter policy means some near-term pain for it. She also said financial markets appear to be functioning well.
What it means for Pakistan: A firmer Fed path lifts US yields and typically strengthens the dollar, which matters directly for Pakistan: a stronger greenback raises the rupee cost of oil and other imports, adds pressure on the State Bank of Pakistan's reserves and complicates its own rate decisions as it manages inflation. It also raises borrowing costs for any fresh external financing, though the source gives no Pakistani figures.
