Boston Fed’s Collins backs latest rate hike

Boston Federal Reserve Bank President Susan Collins said she supported the Federal Reserve’s decision last Wednesday to raise its benchmark interest rate by a quarter-point to about 3.9%. She described the move as appropriate in light of current economic conditions and her assessment of inflation trends. The increase keeps policy in a restrictive stance as officials work to bring inflation closer to the central bank’s 2% target.

Collins also indicated she has penciled in a second interest rate increase for later this year. That expectation suggests she sees a continued need for tight policy in the near term, even as she anticipates less change in rates further ahead.

Collins said she has not seen the progress on inflation that she had hoped for, underscoring her support for further tightening. Persistent price pressures remain a central concern in her policy outlook and are a key reason she views additional action this year as likely.

She pointed to geopolitical developments, including a renewal of combat in the Middle East in August, as adding to the risk that inflation could remain above the Federal Reserve’s goal. In her view, these developments can affect supply conditions and energy costs, contributing to upside risks for inflation and justifying continued vigilance on interest rates.

Improved hiring data also played a role in Collins’s support for the recent rate hike. She noted that solid job gains suggest the economy may be able to withstand higher borrowing costs without a sharp slowdown in activity.

The combination of persistent inflation and a resilient labor market shapes her view that restrictive policy remains appropriate. Collins’s remarks align with other policymakers who see strong demand and ongoing supply challenges as drivers of above-target inflation.

Looking beyond this year, Collins said she expects the Federal Reserve to keep interest rates unchanged next year. That outlook implies a period of policy stability after the additional tightening she has penciled in for the near term.

Neither Collins nor Chicago Fed President Austan Goolsbee has a vote on interest rate decisions this year. Goolsbee is scheduled to become a voting member of the policy-setting committee next year, while Collins will hold a voting role in 2028. Their current perspectives nonetheless contribute to the broader discussion around the Fed’s strategy for managing inflation and economic growth.