Boston Fed President Susan Collins says she would back another rate increase if inflation stops making progress toward the Federal Reserve's 2% target. The remarks land as crypto traders keep pricing in a possible Fed hike this year, even as the odds have slipped from a monthly high.
Boston Fed President Susan Collins said she would support tightening monetary policy again if evidence of sustained progress on inflation fails to materialize. Crypto traders are still betting on a Fed rate hike this year, with the U.S.-Iran war weighing on energy prices.
Collins ties a hike to inflation progress
Collins said in a note on the economy that holding the current federal funds rate range depends on continued evidence that inflation is coming down, unless a hike becomes necessary. Without that evidence, she said, it would be harder to rule out other inflationary forces, including the chance that firms' price-setting behavior has become inconsistent with 2% inflation.
She added that the Fed's mildly restrictive policy stance leaves the FOMC well positioned to handle changing conditions and return inflation to target within a reasonable time. The FOMC has left interest rates unchanged at every meeting this year amid those inflation concerns.
Collins is a non-voting FOMC member this year, but she joins other officials, including Fed President Neel Kashkari, who have also signaled support for a hike if inflation persists. Fed President Austan Goolsbee has separately called inflation the biggest problem facing the U.S. economy.
Traders still price in a hike this year
Data from prediction market Polymarket shows a 56% chance the Fed hikes rates this year, down from a monthly high above 70%. The odds fell earlier this month after Goldman Sachs said markets remain too hawkish even as inflation cools.
The July CPI and PPI inflation prints both came in lower than the previous month. Markets now turn to the PCE inflation data due tomorrow, which could shape the Fed's decision at the September FOMC meeting, while Fed Chair Kevin Warsh is also due to speak later this week.
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