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Fed's Collins: Don't rule out a larger and more persistent impact of tariffs on inflation

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Fed's Collins: Don't rule out a larger and more persistent impact of tariffs on inflation

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New update 2025.08.22 22:19
Fed's Collins: Don't rule out a larger and more persistent impact of tariffs on inflation

update 2025.08.22 22:19

In an interview with Bloomberg on Friday, Federal Reserve Bank of Boston President Susan Collins said that the overall economic fundamentals in the United States are relatively solid, per Reuters.

Key takeaways

"We cannot wait for all of the uncertainty to be behind us."

"Focused on how downside risks are evolving."

"We hear a lot about inflation in discussions around Boston Fed district."

"Don't rule out a larger and more persistent impact of tariffs on inflation."

"Not a done deal in terms of what we do at next meeting."

"Dual mandate risks are in rough balance."

"Not that worried about inflation expectations moving up."

"We can't wait for all uncertainty to be resolved before we make our decisions."

Market reaction

These comments received a hawkish score of 6.4 from FXStreet Speech Tracker. Meanwhile, FXStreet Fed Sentiment Index stays near 104.00, pointing to a neutral stance.

The US Dollar Index stays in its daily range above 98.50 as investors refrain from taking large positions ahead of Fed Chair Jerome Powell's speech at the annual Jackson Hole Symposium.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed's 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials - the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed's weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.


Date

Created

 : 2025.08.22

Update

Last updated

 : 2025.08.22

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