Susan M. Collins, Speech: The National and Regional Economy, Navigating Near-term Changes and Long-term Challenges

Inflation

“We are starting to see some effects of the cumulative policy actions the FOMC has taken so far. Less demand (from higher interest rates), combined with lower input costs (from easing supply bottlenecks), are contributing to noticeably slower inflation for goods – with the prices for some goods actually declining. These developments, together with decreasing energy prices, are at the root of the inflation improvement we saw in the last quarter of 2022. But households consume far more services than goods, and services inflation remains persistently high.”

“A key piece of this has been sizeable increases in shelter costs. However, monetary policy tightening has slowed new rent growth considerably, which should lead to a moderation in shelter inflation starting in the spring of this year.  For services outside of shelter, labor tends to be the most important input – so developments in this component of services inflation are ultimately tied to the behavior of wages.”

Jobs

“Bringing labor market conditions into better balance will therefore be critical to achieving our inflation target. While labor market activity has shown some signs of moderating, there is still a long way to go.”

Fed Funds

“As monetary policymakers, restoring price stability remains our imperative. Thus, I anticipate the need for further rate increases, likely to just above 5 percent, and then holding rates at that level for some time.”

“Now that rates are in restrictive territory and we may (based on current indicators) be nearing the peak, I believe it is appropriate to have shifted from the initial expeditious pace of tightening to a slower pace.”