Boston Federal Reserve President Susan Collins said on Wednesday that the latest U.S. inflation data was mixed and alone would not prompt the Federal Reserve to raise interest rates. At the same time, she said she has not changed her outlook that inflation will eventually decline on its own, but is prepared to raise rates if the decline stalls. Speaking to Reuters at the Jackson Hole economic symposium in Wyoming, Collins said, "The central outlook is still for gradual disinflation," and indicated that the current policy rate is somewhat restrictive. The Commerce Department reported on Tuesday that the Personal Consumption Expenditures (PCE) price index rose 3.7% year-over-year in July, unchanged from June but above market expectations of 3.6%, and marking the 65th consecutive month above the Fed's 2% target. Collins also noted that Treasury yields have a direct impact on the economic outlook, so she is closely watching the recent rise in U.S. Treasury yields. She said there is so far no evidence that the yield increase signals rising inflation expectations, and that inflation expectations embedded in Treasury Inflation-Protected Securities (TIPS) are consistent with price stability. However, she acknowledged that it is difficult to identify all the factors behind the yield increase. When asked about Treasury Secretary Bessent's plan announced last week to double the buyback of U.S. government bonds and its implications for the Fed, Collins declined to comment directly, saying, "We will assess changes in the situation and respond appropriately. It is difficult to make judgments ahead of time at this point." Collins does not have a vote on the Federal Open Market Committee (FOMC) this year.
Fed official open to rate hikes if inflation stalls, signaling potential tighter policy.
Fed official open to rate hikes if inflation stalls, signaling potential tighter policy.
