Boston Federal Reserve President Susan Collins said on Tuesday that the U.S. central bank may need to raise interest rates in the near term if incoming data does not demonstrate clear and sustained progress in reducing inflation toward the Fed's 2% target.
Collins, speaking in a public address, noted that while the Federal Reserve's policy rate currently stands in a range of 3.5% to 3.75%, further tightening could become appropriate if inflation pressures persist. "If evidence of sustained progress in fighting inflation does not materialize, I believe it will be appropriate to tighten policy soon to ensure we deliver price stability within a reasonable timeframe," she stated.
The remarks come ahead of Wednesday's release of the July Personal Consumption Expenditures (PCE) price index, excluding food and energy. Economists surveyed by Reuters expect the core measure to rise at an annual rate of 3.3%, underscoring the challenge facing policymakers in bringing inflation back to target.
Collins cited several factors contributing to inflationary pressures, including recent import tariffs implemented by the Trump administration and elevated oil prices driven by geopolitical tensions involving Iran. She also highlighted structural drivers such as substantial investments in artificial intelligence and recent increases in long-term bond yields, which she suggested could support a gradual disinflationary trend under baseline scenarios.
The Boston Fed chief emphasized that concerns over high prices remain a frequent topic in discussions with stakeholders across New England, reinforcing the urgency of the Fed's inflation mandate.
