By Michael S. Derby
NEW YORK, Nov 13 (Reuters) – Boston Federal Reserve President Susan Collins said on Friday that tighter monetary policy is coming because of high inflation, in comments that suggested the US central bank may have to raise interest rates more than she initially expected.
“I think it’s clear the direction that monetary policy needs to go and I would think that soon some additional firming, tightening of policy is appropriate,” Collins said in an interview with Bloomberg Television.
Given that recent inflation data has not been particularly friendly and shows signs that rising price pressures are broadening in the economy, Collins said, “I think it may be that a bit of a tighter policy path than I had penciled in a couple of months ago might be appropriate.”
The Fed is widely expected to raise its benchmark interest rate, currently in the 3.75%-4.00% range, at its December 8-9 policy meeting. Traders and investors expect a quarter-percentage-point hike at that meeting, although Fed Governor Christopher Waller earlier this week suggested the possibility of a half-percentage-point move.
Financial markets also expect another Fed rate hike in January.
“I don’t want to get ahead in terms of how high we should go or how fast,” Collins said, adding that her “best-case scenario” is for “a careful adjustment of policy.” She acknowledged, however, that “there are scenarios where I might think about that somewhat differently.”
Collins spoke to Bloomberg Television while attending a housing conference hosted by her regional Fed bank.
In opening remarks for the event, Collins said delivering price stability is key to a healthy housing sector even if tighter monetary policy means some near-term pain for the sector.
She also said in her interview that financial markets appear to be functioning well.
(Reporting by Michael S. Derby; Editing by Paul Simao)
