Federal Reserve Bank of Boston President Susan Collins underscored on Monday that future monetary tightening is needed to bring inflation down to its 2% target "before high inflation rate becomes entrenched in expectations."
Speaking before the Greater Boston Chamber of Commerce, Collins explained that maintaining price stability would necessitate slower employment growth and a marginally higher unemployment rate, while Federal Reserve's mandate on reducing inflation to its target is led by hiking its interest rates "which slows the interest-sensitive components of demand."
However, the bank's president cautioned that some geopolitical events could cause the economy to enter a recession as monetary policy tightens even further, but added that the objective of a more modest downturn is "achievable." Last week, the Federal Reserve raised its federal funds rate by three-quarters of a percentage point, hitting its highest point since January 2008.
