Inflation Fight Will Be a Bumpy Ride, But We’ll Get There

Tame inflation might not run its course as quickly as the US Federal Reserve hoped – that’s the word from Federal Reserve Bank of Boston President Susan Collins. Rate rises are starting to slow price increases, but no one knows how long that will take.

Why the Wait?

A part of this delay is that interest rate increases tend to manifest their full impact only with some economic lag. Part of it is because signs of inflation have been more persistent than anticipated. Another, and the most important part, is that the Fed does not want to hurt the job market, which is robust.

Don’t Panic About Housing

Although home prices are rising rapidly, Collins says we don’t have to worry about a replay of 2008 housing bubble woes. Banks are in a much better position now than they were at that time and haven’t loosened their lending standards.

The Road Ahead

Its current stance on interest rates is that it will leave them alone for a while and will assess progress on inflation. Should inflation not come down as expected, there is some hope for rate cuts in the future, but there won’t be any timelines. The main takeaway?