Fed official expects interest rates above 5%, slower rate hikes

President of Federal Reserve Bank of Boston Susan Collins said Thursday she expects the interest rates above 5% to tame the inflation, signaling more but milder rate hikes by the Fed in the coming months.

"I anticipate the need for further rate increases, likely to just above 5 percent, and then holding rates at that level for some time," she told a conference held in Boston, Massachusetts. "Restoring price stability remains the imperative for monetary policymakers, and there is more work to do."

The Boston Fed chief said she remains "reasonably optimistic" that there is a pathway to reducing inflation without a significant economic downturn, adding: "I anticipate the need for further rate increases, perhaps at a slower pace, depending on incoming data, before holding rates at a sufficiently restrictive level for some time."

The Fed raised its benchmark interest rate last month by 50 basis points, carrying the target range for the federal funds rate to between 4.25% and 4.5% -- its highest in 15 years.

The central bank is expected to make a 25 basis points of rate hike at the conclusion of its first 2023 meeting on Feb. 1, according to the FedWatch Tool provided by the US-based global markets company the Chicago Mercantile Exchange Group as of Thursday.

Philadelphia Federal Reserve President Patrick Harker said Wednesday that he expects the Fed to lower the intensity of rate hikes.

"Days of raising them (rates) by 75 basis points at a time have surely passed ... hikes of 25 basis points will be appropriate going forward," he said during his speech at Newark, Delaware. "I expect that we will raise rates a few more times this year."

The Philadelphia Fed head said he expects the policy rate will be restrictive enough that the Fed will hold rates in place to let monetary policy do its work, adding that its goal is to slow the economy modestly and bring demand more in line with supply.

"What’s encouraging is that even as we are raising rates, and seeing some signs that inflation is cooling, the national economy remains relatively healthy overall," he noted.

The annual consumer inflation in the US came in at 6.5% in December, easing from the 7.1% level in November, while the annual producer inflation eased to 6.2% in December 2022, slowing down from November's gain of 7.3%.

Source: Anadolu Agency