Howard Schneider: Fed’s Collins: Further tightening possible, though “patience” required

WASHINGTON: Further Federal Reserve interest rate increases are “not off the table” with inflation still not clearly contained, Boston Federal Reserve President Susan Collins said in remarks on Friday backing the current central bank outlook for interest rates to remain “higher, and for longer.”
Collins tempered her outlook by saying that the current environment required “considerable patience” from policymakers to be sure they get the right signal from data they are studying to be confident inflation is on a steady downward track back to their 2% target.
On that front recent inflation data has been “encouraging,” Collins said in prepared remarks to the Maine Bankers Association, but not yet convincing.
“It is too soon to be confident that inflation is on a sustainable trajectory back to the 2% target,” Collins said, with job growth still “above trend,” and elevated inflation in aspects of the service sector still a concern.
“I expect rates may have to stay higher, and for longer, than previous projections had suggested,” said Collins, who currently does not have a vote on interest rate policy. “Further tightening is certainly not off the table.”
The Fed on Wednesday held interest rates steady at a range of between 5.25% and 5.50%, but in new projections 12 of 19 policymakers said they anticipate one more quarter-point increase in the benchmark federal funds rate before the end of this year.
The Fed has two scheduled sessions left, concluding on Nov. 1 and Dec. 13.
More notably, officials projected that while they still expect to begin reducing interest rates next year as inflation falls, the path down will be slower than previously anticipated. Though opinions are diffuse, policymakers at the median now see only a half percentage point of rate cuts in 2024 versus the full percentage point decline seen in their June quarterly outlook.