On Wednesday (September 23) during Asian trading hours, the US dollar index fluctuated slightly higher, currently trading around 100.55. Overnight, the dollar index touched 100.69, a new high since the end of July. As the dollar remains strong, the latest statements from Federal Reserve officials have provided new clues for the market to judge the policy path. Boston Fed President Susan Collins reiterated her support for the Fed's latest policy tightening on Tuesday, believing that a higher interest rate path is needed to guide persistent price pressures back to the official target. She emphasized in a social media post that high price pressures require a more restrictive policy stance to achieve long-term price stability. These remarks came after the Federal Open Market Committee unanimously voted last week to raise the benchmark interest rate by 25 basis points, and updated economic projections showed that most policymakers expect further tightening, with the median forecast pointing to at least one more rate hike this year.

More restrictive interest rates are key to a sustained return of inflation to the target.

Collins explicitly stated that "a slightly more restrictive federal funds rate will help ensure a sustained return of inflation to the target." She added that recent economic indicators point to an increased likelihood of a future scenario where "inflation remains significantly above 2 percent after more than five years of high costs." This assessment characterizes the current policy stance as needing further tightening, rather than being sufficient. She emphasized that after years of inflation exceeding the target, insufficiently restrictive policy could cause inflation expectations to re-anchor at excessively high levels, leading to solidified price pressures. Therefore, a higher interest rate path is needed to strengthen the restrictive stance, compress aggregate demand, suppress businesses' ability to pass on costs, and guide inflation expectations to re-anchor at 2%. Collins's statement indicates that she believes the current tightening力度 is insufficient to completely eliminate the risk of persistently above-target inflation, and policy must remain sufficiently aggressive until the path to inflation's return becomes clearer and more sustainable.

A robust labor market provides room to focus on inflation.

Collins emphasized that resilient labor market conditions provide central banks with room to aggressively focus on their price stability mandate without immediately threatening employment. She noted that while experiences vary across sectors, the overall low unemployment rate positions the broader economy to absorb tighter financial conditions. This implies that, in the current environment, the Fed can prioritize addressing inflation without excessive concern about the immediate impact of tightening on employment, as the low unemployment rate provides a buffer. A robust labor market not only reduces the risk of a hard landing due to excessive policy tightening but also allows policymakers to focus more on curbing price pressures. Collins believes this resilience gives central banks greater flexibility in balancing their dual mandates, allowing them to continue restrictive policies without rapidly damaging employment until inflation has clearly subsided.

Consistent with the overall policy calibration direction of the Federal Reserve

Collins's stance aligns with the broader effort by the Federal Reserve to calibrate policy between persistent inflation risks and shifting economic momentum. Fed Chairman Kevin Warsh previously noted that the latest 25-basis-point rate hike effectively removed "a degree of easing" from the economy, and the central bank is assessing the trajectory of future policy. Collins's remarks further reinforce support within the Fed for further tightening, echoing last week's median dot plot signaling at least one more rate hike this year. Her comments suggest that even against the backdrop of shifting economic momentum, most policymakers prioritize inflation risks and require a continued restrictive stance to solidify price stability. This statement helps unify market expectations regarding the future policy path, demonstrating a high degree of consensus within the Fed on the direction of "further tightening."

Summarize

Collins' remarks continued the hawkish tone within the Federal Reserve: rising inflation risks necessitate a more restrictive policy stance, and low unemployment provides room for focusing on the inflation mandate. She explicitly supported further tightening, believing that slightly more restrictive interest rates are necessary to ensure a sustained return of inflation to the target. This aligns with last week's unanimous 25 basis point rate hike by the FOMC, with the median dot plot pointing to at least one more rate hike this year. Fed Chairman Warsh's comments regarding removing "a certain degree of easing" further confirmed the policy direction. Going forward, attention should be paid to upcoming US inflation and employment data to verify expectations of a final rate hike this year, while also monitoring statements from other Fed officials to determine if the hawkish consensus has been further solidified. (US Dollar Index Daily Chart, Source: EasyForex) At 8:11 AM Beijing time, the US Dollar Index was at 100.56.