Boston Fed President Susan Collins Talks Inflation, Housing

SPEAKER_1 (0:02)

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Michael McKee (0:07)

We'd like to welcome everybody watching us on Bloomberg television, listening to us on Bloomberg radio around the world. And we'd like to welcome Susan Collins to her own office here at the Boston Fed. And it is Friday the 13th, and there is a kind of a scare out there and it's called inflation. PPI came in a little lighter than people expected, but still enough to suggest that inflation is still going up.

So where does that leave you in terms of what the Fed needs to do?

Susan Collins (0:35)

Yeah, so first of all, welcome back to the Boston Fed. Great to have you here.

And you know, laser focused on the data. I don't put too much stock in any one release, but what I'm seeing is consistent with what I've been seeing, which is that inflation is too high. And we're actually seeing some broadening, evidence of broadening of price pressures. We saw that in the CPI data that we received earlier this week, and that's something I have been watching. Haven't had a chance to do a deep dive on the PPI numbers yet, but I think it's clear the direction and the numbers are less promising than I might have hoped.

Michael McKee (1:15)

Well, if it's clear the direction of inflation, does that make the direction of the Fed funds rate clear? Are you in favor of raising it in December?

Susan Collins (1:25)

Well, so it does seem to me that the appropriate direction for monetary policy is clear. You know, as I look at economic conditions and how things are evolving, I'm happy to say more about it. But what I see is a labor market that is probably on a bit more solid footing.

Economic growth, quite resilient there, and perhaps a little stronger given the uncertainty and some of the shocks we've seen. But inflation is too high and has been for too long. And as I mentioned, seeing some evidence of broadening price pressures. So I think it's clear the direction that monetary policy needs to go. And I would think that soon some additional firming, tightening of policy is appropriate.

Michael McKee (2:08)

Well, there are two questions about magnitude and timing. One, Governor Waller raised the possibility, I'm not saying he's advocating it, of a 50 basis point move in December.

And President Logan yesterday suggested maybe what we do is we move up a second move to January from what the market is anticipating in March.

Are you on board with either of those ideas, or do you think either is necessary?

Susan Collins (2:33)

So, you know, while I said the direction is clear, I don't want to get ahead in terms of the, how high we should go or how fast. You know, I will say that as I look at the data that I've been assessing, and I try to look holistically at how the numbers come in, I think it may be that a bit of a tighter policy path than I had penciled in a couple of months ago might be appropriate. But I think how high and how quickly is something we're going to have to decide meeting by meeting. And, you know, I am certainly open-minded as I think that through.

Michael McKee (3:08)

Well, Governor Waller's concern was that we get, we let inflation fall too far behind and the Fed's credibility suffers. Do you think we're in that kind of situation where you might have to discuss at least a 50 basis point move?

Susan Collins (3:24)

So I think that it has been, you know, I watch carefully some of the measures of inflation expectations, for example, which I do see the medium to longer term ones as one way to gauge the credibility of our commitment to 2% inflation, which is strong, is firm, and is really important.

And if I saw evidence that that was unmooring, I would be very concerned. That's not something that I'm seeing at this stage. I think we need to watch it carefully. And so my, you know, kind of best case scenario is that a careful adjustment of policy is appropriate at this time. But again, there are scenarios where I might think about that and what differently.

Michael McKee (4:09)

Well, you're willing to tell us what you think is best for the Fed at its next moves, in its next meetings, as are almost all of your colleagues. And we've heard from, I think, 14 of them this week.

But that's not what the chairman seems to think is a good idea. I mean, is forward guidance, what is forward guidance to you and is what people are saying, is there something wrong with that?