Boston Fed President Susan Collins highlighted that recent rise in long-term yields implies some tightening of financial conditions. “If it persists, it likely reduces the need for further monetary-policy tightening in the near term,” she noted in a speech yesterday.
Such market dynamics further bolstered Collins’ perspective on the current tightening cycle led. “This reinforces my view that we are very near, and perhaps at, the peak federal funds rates for this tightening cycle,” she stated, indicating that the cycle could be nearing its zenith.
However, Collins maintained a flexible stance on the future course of action, and clarified, “I would not take further tightening off the table yet.”
Weighed in on yesterday’s CPI data, which revealed that September’s headline inflation held steady at 3.7% and core inflation eased to 4.1%. Collins said, “Today’s CPI release is a reminder that restoring price stability will take time.”
BoE’s Bailey anticipates sharp decline in inflation, stresses need for balance
BoE Governor Andrew Bailey, speaking at an International Institute of Finance conference, projected a “quite a strong drop” in next month’s inflation figures. This expectation is largely due to the unique household energy pricing system in the UK, which is set to impact the overall inflation calculations differently compared to other sectors.
However, he was quick to temper this optimistic forecast with a note of caution regarding the broader inflationary landscape. According to Bailey, underlying components of the inflation measure continue to show disparities that could complicate monetary policy response.
The Governor pointed out that while energy price inflation is currently running at minus 20%, the inflation in services remains high, around 6%. This stark contrast in inflation rates across different sectors presents an “unbalanced” picture.
“We don’t have to have every component actually at target, but you do have to have a better balance,” Bailey remarked.