Boston Fed’s Collins: Policy Restrictive, Rate Hikes Possible if Inflation Disappoints

• Boston Fed President Susan Collins views current policy as restrictive.
• Supports holding rates, but rate hike possible if inflation disappoints.
• Sees gradual disinflation towards 2% target.

Boston Fed President Susan Collins stated on Thursday, during the Jackson Hole Symposium, that the Federal Reserve’s current monetary policy is restrictive and is expected to lead to gradual disinflation. She noted that while inflation remains too high, recent PCE data does not alter her view on policy effectiveness, and the US labor market remains strong with the economy growing near-trend. Collins expressed support for holding interest rates steady for now, contingent on seeing further progress towards the central bank’s 2% inflation target. However, she also indicated that a rate hike would be appropriate if inflation disappoints or if evidence of sustained disinflation is absent. She added that current US bond yields are consistent with price stability, and disinflation is the most likely outcome barring new tariff or oil shocks.