Boston Federal Reserve President Susan Collins said on Tuesday that U.S. interest rates may need to rise soon unless clear evidence emerges of a sustained decline in inflation.
Collins, speaking in Washington, noted that more than five years of inflation above the Fed's 2% target has kept concerns about high prices prominent in her discussions with stakeholders across New England. "Should evidence of sustained inflation progress not materialize, I believe it will be appropriate to tighten policy soon to ensure we deliver price stability in a reasonable time frame," she stated.
The Federal Reserve has held its policy rate in a 3.5% to 3.75% range since December, pausing further adjustments as officials assess incoming data. Economists polled by Reuters expect the core Personal Consumption Expenditures price index, which excludes food and energy, to have risen at a 3.3% annual rate in July. New inflation data is due Wednesday, followed by a keynote address by Fed Chairman Kevin Warsh at the central bank's annual research symposium in Jackson Hole, Wyoming, on Thursday.
Collins highlighted several factors contributing to elevated inflation, including the Trump administration's import tariffs, higher oil prices driven by the war with Iran, and substantial investments in artificial intelligence. She added that under her baseline outlook, the current policy rate, alongside recent increases in longer-term bond yields, should continue to support gradual disinflation.
Her comments underscore ongoing divisions within the Fed regarding the appropriate policy stance as officials balance concerns over persistent price pressures against progress in cooling inflation. The remarks come as U.S. Treasury yields have risen, adding to the complexity of the decision-making environment ahead of the Jackson Hole gathering.
