Boston Federal Reserve President Susan Collins said on Thursday that recent U.S. inflation readings present a mixed picture, keeping the door open for further interest rate hikes if price pressures fail to recede as expected.
Collins, speaking at the annual Jackson Hole economic symposium in Wyoming, noted that the July Personal Consumption Expenditures (PCE) Price Index rose at an annual rate of 3.7%, exceeding the Federal Reserve's target. The increase was driven by factors she described as unlikely to warrant tighter monetary policy, including portfolio management fees tied to stock valuations rather than underlying supply and demand conditions.
Underlying inflation, however, showed signs of stabilization. Monthly inflation for market-determined goods and services approached the Fed's 2% target, aligning with the central bank's baseline projection of gradual disinflation under the current policy stance, which remains moderately restrictive. Boston Fed research also indicated that inflation linked to the Trump administration's import tariffs may be stabilizing, while productivity gains are contributing to disinflationary pressures.
Collins emphasized that she continues to monitor Treasury yields, which stood at 4.644% as of August 26, up 0.11% from the previous session. She noted that rising yields have not signaled increased inflation expectations, as investor compensation for inflation remains consistent with price stability.
Federal Reserve Chairman Kevin Warsh is scheduled to address the inflation outlook in his opening remarks at the Jackson Hole conference on Friday. Collins declined to comment on recent bond market interventions by Treasury Secretary Scott Bessent.
The mixed inflation signals underscore the Fed's cautious approach as it balances progress toward its 2% inflation goal against risks of overtightening in a still-resilient economy.
