Fed's Collins backs cautious rate hikes, warns of broadening inflation

Inflation remains a concern for Boston Federal Reserve (Fed) President Susan Collins, who said that “inflation is too high and appears to be broadening,” reinforcing earlier remarks from Chicago Fed President Austan Goolsbee.

Speaking to Bloomberg TV on Friday, Collins described the latest inflation figures as “less promising than I hope” but said the direction of monetary policy was clear. While her base case envisages “careful adjustments” to monetary policy, she said she did not know how high interest rates should rise.

Main points from Collins’s remarks:

Inflation appears to be spreading more broadly and remains too high

The latest inflation figures are less encouraging than I had hoped

There is clarity over the future direction of monetary policy

The labour market seems to be on a SOLID footing

In my view, some further policy tightening would be warranted soon

The policy direction is clear, though its pace and end point remain uncertain

The Fed may need to lift rates further than anticipated

The most favourable scenario involves ‘careful adjustment’ of monetary policy

I do not want to specify how far or how quickly rates should rise

Higher costs are expected to be passed on to consumers by many firms

With demand strong, some firms anticipate recruiting more staff in key sectors

I see signs that financial markets are functioning well and remain stable