Fed Collins: Tightening lending standards may partially offset need for more rate hikes

Fed’s ongoing battle against inflation was underscored by Boston Fed President Susan Collins, who expressed concerns over the persistently high inflation rates. She stated yesterday, “Inflation remains too high, and recent indicators reinforce my view that there is more work to do, to bring inflation down to the 2% target associated with price stability.”

Collins reiterated her belief that Fed can successfully lower inflation without causing a recession, but acknowledged that a rise in unemployment would be necessary to achieve this goal. As Fed prepares for its May meeting, Collins admitted it is too early to predict the appropriate course of action.

She also noted that recent developments may lead banks to adopt a more conservative outlook and tighten lending standards, thus helping to slow the economy and reduce inflationary pressures. “These developments may partially offset the need for additional rate increases,” she added in her prepared remarks.