Federal Reserve official Collins says rate hikes may be needed

Susan Collins, President of the Federal Reserve Bank of Boston, said on Wednesday that she envisions interest rates remaining stable for a longer period of time, but there may also be scenarios where some degree of policy tightening is needed to ensure that inflation returns to the central bank's 2% target. The textbook-style monetary policy advocates ignoring sudden supply shocks such as rising oil prices. Speaking in Boston, Collins said that inflation persisting above target for over five years has weakened her patience in keeping price increases in check. She suggested that it may be necessary to maintain the current restrictive monetary policy for "a period of time." According to her prepared remarks, Collins stated, "This shock has slightly tilted the risks facing real economic activity further toward the downside and inflation risks further toward the upside." Collins expressed hope for inflation to recede, which could allow the Fed to continue lowering interest rates later this year. However, she also mentioned that if conflicts persist and prices continue to rise, "I can imagine a scenario where some policy tightening might be necessary to ensure that inflation returns promptly and persistently to 2%."