- Right now Fed policy well positioned to deal with risks
- Expects Fed will need to keep restrictive policy for some time
- It’s possible US central bank will need to hike interest rates to cool inflation pressures
- Essential for Fed to do what’s needed to get inflation to 2%
- Hopes economy will allow for more rate cuts later this year
- Prolonged Middle East war creates challenging policy choices
- Quick end to war would mean resilient demand, some rise in unemployment
- Inflation persistence makes it harder to look through energy shock
- Energy shock creates downside growth risks, upside inflation risk
- It is critical that inflation expectations stay anchored
- Inflation will not abate this year, could cool in 2027
- Most worried about inflation outlook right now
- The longer the war goes on, the greater the inflation impact
- US is more insulated against energy shocks than in the past
Collins is not a voting member on the FOMC board this year.
Collins’ comments lean more hawkish overall. While she still expressed hope for additional rate cuts later this year, the broader message focused on persistent inflation risks, the possibility of renewed rate hikes, and the need to keep policy restrictive for an extended period. Her concern that inflation may not cool meaningfully until 2027, combined with warnings that a prolonged Middle East conflict could worsen inflation pressures while slowing growth, suggests the Fed remains highly cautious about easing policy too quickly.
