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Fed’s Collins: It’s time for Mon Pol to be patient and thoughtful

  • The Fed should “allow time” when making monetary policy choices
  • It is too early to say that inflation will return permanently to its target
  • The Fed must balance lower inflation and an excessive slowdown in the economy
  • The Fed can probably achieve its goals without causing significant economic hardship
  • There is still too much demand on the labor market
  • Wage growth remains high
  • Moderation in basic services inflation has been modest
  • The economy is expected to slow by the end of the year

Collins said now is the time to be patient and think about politics. There is a sense of unanimity within the Fed to delay a rate hike in September, but to consider a hike later if inflation remains elevated. The November 1 meeting suggests a 40% chance of a hike.

Key passage:

The risk that inflation will remain high for longer must now be weighed against the risk that an overly restrictive monetary policy will lead to a slowdown in activity greater than what is necessary to restore price stability. This context calls for a patient and cautious, yet deliberate policy approach, allowing time to assess the effects of the policy measures taken so far, and then acting appropriately. It is important to note that patience does not mean indecision or change in commitment to the 2% target, but rather time to ensure that the economy is on a clear path to achieving stable price.


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