Careful adjustment of policy is appropriate, says Susan Collins on 50 bps rate hike

Boston Fed President Susan Collins said that a careful adjustment of policy is appropriate in the context of a 50 basis point rate hike, signaling a preference for measured tightening rather than aggressive moves. The statement points to a transmission channel centered on the policy rate path and the pricing of the terminal rate, as markets weigh whether a slower pace of hikes implies a lower peak for the federal funds rate. Front-end Treasury yields and rate-sensitive assets such as long-duration growth equities and rate-sensitive credit are most exposed, since shifts in expected policy paths feed directly into discount rates and financing conditions. Traders will watch the next Consumer Price Index release and subsequent Fed communications for evidence on whether disinflation is sufficiently established to justify a more gradual approach.

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