Fed's Collins backs cautious rate hikes amid warning of broadening inflation

Concerns over inflation were echoed by Boston Federal Reserve (Fed) President Susan Collins, who said that “inflation is too high and appears to be broadening,” following similar remarks earlier from Chicago’s Fed President Austan Goolsbee.

Speaking to Bloomberg TV on Friday, Collins described the latest inflation figures as “less promising than I hope”, while saying that monetary policy had a clear direction. Her base-case scenario envisages “careful adjustments” to monetary policy, although she said she did not know how high interest rates should rise.

What were the main points?

Inflation remains excessively high and seems to be spreading more widely

The latest inflation figures are less encouraging than I had hoped

There is clarity on the direction monetary policy will take

The labour market seems to remain on SOLID ground

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

While the policy direction is clear, its pace and endpoint remain uncertain

The Fed could need to raise rates by more than anticipated

A ‘careful adjustment’ of monetary policy is the best-case scenario

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

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

With demand strong, some firms anticipate hiring more workers in key sectors

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