Jan 11 (Reuters) – Boston Federal Reserve Bank Chair Susan Collins said she is inclined to hike interest rates by a quarter of a point at the forthcoming central bank meeting, the New York Times reported on Wednesday.
“I think 25 or 50 would be appropriate; I would lean towards 25 at this stage, but it’s very data dependent,” Collins said in an interview with the paper.
Collins, who became president of the Boston Fed last year after working in academia, held a voting rights role on the rate-setting Federal Open Market Committee last year but will not do so this year as part of the normal rotation of regional bank leaders on the committee.
Collins was addressing the Fed’s next monetary policy meeting Jan. 31-February 2. 1.
The Fed has hiked rates at a historically aggressive pace over the past year, raising its target federal funds rate from near zero in the spring to between 4.25% and 4.5% by the end of 2022.
Officials have further hikes slated for 2023 and expect the federal funds rate to peak at 5.1%, where it is likely to stay for an extended period as the Fed attempts to slash some of the highest levels of inflation in decades.
The Fed hiked rates four times last year by 75 basis points before slowing to half a percentage point in December. There is currently a lively debate on the financial markets as to whether signs of cooling inflation will allow credit inflation to slow down further.
In Wednesday afternoon’s trading, futures markets discounted an 80% chance of the Fed raising its near-term target by a quarter of a point.
Speaking to The New York Times, Collins said there could be benefits in raising interest rates more slowly. “Slow adjustment gives more time to evaluate the incoming data before making a decision as we near our goal. Minor changes give us more flexibility,” she said.
Reporting by Michael S. Derby in New York and Akanksha Khushi in Bengaluru Editing by Chris Reese and Leslie Adler
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