By Michael S. Derby
BOSTON (Reuters) -Federal Reserve Bank of Boston President Susan Collins said Friday that a retreat from an integrated global economy could complicate the central bank’s work and push up price pressures.
A shift toward “economic fragmentation” could “usher in a transitional period of inflationary pressures,” Collins said in the text of a speech to be delivered at a conference held by her bank. What’s more, this kind of environment could lead to “less financial integration,” which “could raise domestic borrowing costs, as well as affect financial conditions more broadly,” she said.
Collins did not comment on the near-term monetary policy outlook in her remarks, but she did say “a more volatile and fragmented global environment could result in more volatile business cycles and inflation.”
Such an environment “could complicate the Fed’s efforts to maintain price stability and maximum employment, especially if economic shocks in this new environment have a more substantial supply-side component,” the official said.
Collins also said that rising global risks and fragmentation “tend to depress short-term economic activity, while reducing longer-term growth,” while adding these forces “will likely be major, transformative, and intertwined forces shaping our economic landscape in the coming years.”
(Reporting by Michael S. Derby; Editing by Chizu Nomiyama )
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