Federal Reserve's Collins: Current Patience on Inflation Erosion, Rates May Need to Stay Elevated Longer

BlockBeats News, May 13th — The Federal Reserve's Collins stated on Wednesday that she expects interest rates to remain stable for a considerable period and believes that in certain circumstances, further tightening of policy may be necessary to ensure inflation returns to the 2% target. She noted that traditional monetary policy typically "overlooks" sudden supply shocks, such as an increase in oil prices. However, considering that inflation has been above the target level for over five consecutive years, she believes that the current patience in suppressing price increases is diminishing.

Collins stated that the current moderately tight monetary policy "may need to remain in place for some time." She pointed out: "The shock has slightly increased the downside risks to economic activity, while the upside risks to inflation have further intensified." At the same time, she also stated that if inflation falls back, the Fed may still continue to cut interest rates later this year. Collins added, however, that if the conflict persists and leads to further price increases, "I can envision a scenario where tightening policy is needed to ensure that inflation returns to 2% in a reasonable and sustainable timeframe." (FXStreet)