Collins’ focus on how widespread inflation is moves attention to core and services prices, not just the headline energy-driven numbers. Signs of fuel costs spreading into broader prices would firm December hike pricing and support front-end yields and the dollar. For oil, that means sustained strength in crude and products now carries a second-round risk the Fed is explicitly watching. Her stress on elevated uncertainty also leaves room for the data to delay the next move, which caps how aggressively markets can price an October hike.
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Collins has already called for another hike, and now she is spelling out what will set the timing: whether inflation spreads beyond energy in an uncertain economy.
Summary:
Boston Federal Reserve President Susan Collins said on Tuesday that economic uncertainty is elevated and that she is paying close attention to how broad-based inflation pressures are, as she set out the factors that will shape her view on the timing of the next rate move.
Collins said she is very focused on the inflation data and that she looks at the economy holistically when weighing the future path of policy. Her emphasis on breadth suggests she will be watching whether price pressures spread into a wider range of goods and services, rather than staying concentrated in a few categories.
The comments add detail to remarks earlier in the day in which . In that speech text, prepared for a banking conference at the Boston Fed, she said she had supported the central bank’s quarter-point hike in September, which took the policy rate to a range of 3.75% to 4.00%, and called the risk of high inflation the Fed’s main focus.
Collins has flagged several forces that could keep inflation above the Fed’s 2% target, including investment in data centres and artificial intelligence infrastructure, the ongoing effect of tariffs, and energy costs linked to the war in the Middle East. She has said she expects both headline and core inflation to run above target in coming months, citing recent increases in prices for refined fuels such as diesel, jet fuel and heating oil.
Her baseline outlook remains constructive, with healthy growth, a job market near full employment and a gradual return of inflation to target. Her latest comments make clear, however, that she sees the outlook as uncertain and that the incoming data will decide how quickly she wants policy to move.
Policymaker projections released in September pointed to one more increase this year. Several Fed officials have suggested in recent weeks that it is more likely in December than at the October 27-28 meeting, and Collins has said the policy path into the new year will depend on the data.
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - Central Bank
