Fed’s Collins: Inflation threat has receded, but need more evidence before policy normalization

Fed’s Collins: Inflation threat has receded, but need more evidence before policy normalization

Boston Federal Reserve (Fed) President Susan Collins still expects the Fed to begin easing later this year, but progress on inflation has slowed and policymakers need to wait for more evidence that the road to 2% remains clear.

Key highlights

  • Need to see more evidence that the disinflationary process will continue before carefully normalizing policy.
  • More time is needed to discern if the economy is sustainably on the path to stability, while still maintaining a healthy labor market.
  • Fed’s Collins wants to see continued evidence that wage growth is not contributing to inflation.
  • Return to 2% likely requires a moderating of the pace of demand growth.
  • Looking for well-anchored inflation expectations and an orderly moderation in labor demand.
  • Wants to see continued declines in housing price inflation and non-shelter services inflation.
  • The threat of inflation remaining above 2% has receded.

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