Susan M. Collins, Speech: Women’s Leadership Conference with the Vermont Bankers Association

Inflation

“I’ll note that there have been some modest improvements in inflation, mostly due to easing of global supply chain constraints that reduce price pressures on goods. And as lower market rents pass through into overall costs for shelter over time, that part of inflation should also ease. But services inflation excluding shelter remains quite elevated and that likely is going to require cooling of a labor market that’s still clearly very tight. And while wage pressures have softened a bit, labor costs continue to grow faster than is consistent with inflation of 2%.”

Fed Funds

“So given the current data, I anticipate that reducing inflation back to target will require additional federal funds rate increases to bring interest rates to a sufficiently restrictive level, and then holding there for some perhaps extended time. Of course, my policy decisions will continue to be based on a holistic assessment of the range of available data as we work to realign demand with supply and alleviate the pressures on wages and prices.”

Recession

“But there are also reasons to be optimistic that the economy could prove more resilient to tight financial conditions than it has in the past. Household fundamentals remain healthy overall despite the fact that there’s been an erosion in purchasing power from high inflation. And here the strong labor market is helping sustain incomes. And many households still have some of the savings that were accumulated early in the pandemic. And on the business side, many companies continue to spend and to hire given their strong balance sheets. So I remain optimistic that there is a path to bringing inflation down without a significant economic downturn.”