Fed’s Susan Collins Backs Rate Hike If Higher Inflation Persists

Boston Fed President Susan Collins has supported a Fed rate hike if inflation persists and shows no progress in falling toward the 2% target. This comes as crypto traders continue to bet on a potential hike this year, with the U.S.-Iran war weighing on energy prices.

Susan Collins Supports Fed Rate Hike If Inflation Persists

In a note sharing her current take on monetary policy, the Fed president said it would be appropriate to tighten policy if evidence of sustained progress on inflation does not materialize. She noted that this is key to ensuring that they deliver price stability in a reasonable time frame.

This came as Collins said maintaining the current federal funds rate target range will require continued evidence that inflation is coming down, unless a Fed rate hike becomes necessary. “Without such evidence, it will be more difficult to rule out other inflationary forces being at play – including the possibility that firms’ price-setting behavior has become inconsistent with 2 percent inflation,” she said.

The Fed president also remarked that the mildly restrictive policy stance puts the FOMC in a good position to address evolving economic conditions and return inflation to target in a reasonable amount of time. So far this year, the FOMC has left interest rates unchanged at all meetings amid inflation concerns.

Collins, a non-voting member this year, joins other officials such as Fed President Neel Kashkari, who have signaled their support for a Fed rate hike if inflation persists. Fed President Austan Goolsbee recently called inflation the biggest problem that the U.S. economy is facing.

A Hike Still Expected This Year

Crypto traders continue to bet on a Fed rate hike this year. Data from the top crypto prediction market platform Polymarket shows a 56% chance that the Fed will hike rates this year, although down from a monthly high above 70%.

The odds of a hike fell earlier this month as Goldman Sachs said that markets are still too hawkish even as inflation cools. Notably, the July CPI and PPI inflation prints came in lower than the previous month.

The market’s next focus is on the PCE inflation data, which drops tomorrow and could influence the Fed’s decision at the September FOMC meeting. Fed Chair Kevin Warsh is also due to speak later this week and could provide insights into the Fed’s current stance on monetary policy.