Inflation getting close to 2%, Collins said, but Fed needs more proof

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The chief of the Boston Federal Reserve said inflation has slowed faster than expected and that a reduction in interest rates would be suitable “later in the year,” but the central bank wants more certainty before it cuts interest rates.

“We are on a path to price stability with inflation durably at 2%,” Susan Collins said in a speech on Wednesday to the Boston Economic Club.

If the progress continues, Collins indicated, the Fed could begin “later in the year “to unwind a series of interest-rate increases in 2022 and 2023 meant to tame inflation.

Still, Collins cautioned the Fed needs more evidence that a 2% rate of inflation can sustained.

She pointed to the surprisingly strong U.S. jobs report in January as a sign that a strong economy could keep upward pressure on wages and prices.

Top Fed officials have put on a full-court press to persuade investors they won’t cut interest rates very soon. Wall Street now expects the first rate reduction won’t take place until May instead of March.

Collins is not a voting member this year of the Fed panel that sets U.S. interest rates.

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