Fed's Collins: Prolonged Middle East war creates challenging policy choices

Susan Collins, President of the Federal Reserve (Fed) Bank of Boston, spoke at a fireside chat at an event hosted by the Boston Economic Club on Wednesday. She claims that she expects the Fed to need to keep a restrictive policy for some time, and that a quick end to the Middle East war would mean resilient demand and some rise in unemployment in the US.

Key takeaways:

Right now, Fed policy is well positioned to deal with risks.

I expect the Fed will need to keep restrictive policy for some time.

A quick end to war would mean resilient demand, some rise in unemployment.

Prolonged Middle East war creates challenging policy choices.

I hope the economy will allow for more rate cuts later this year.

Essential for the Fed to do what's needed to get inflation to 2%.

It’s possible that the US central bank will need to hike interest rates to cool inflation pressures.

The longer the war goes on, the greater the inflation impact.

Inflation will not abate this year, could cool in 2027.

It is critical that inflation expectations stay anchored.

Energy shock creates downside growth risks, upside inflation risk.

Inflation persistence makes it harder to look through the energy shock.

most worried about the inflation outlook right now.

The US is more insulated against energy shocks than in the past.”