Boston Fed’s Collins signals openness to September rate hike

Federal Reserve Bank of Boston President Susan Collins said on Tuesday she remains open to raising interest rates at the central bank’s September policy meeting, citing persistent inflation pressures that warrant a potential hike.

Collins, a voting member of the Federal Open Market Committee (FOMC) this year, emphasized that incoming economic data will determine the appropriate policy stance. While she did not commit to a rate increase, her remarks underscore the Fed’s data-dependent approach amid elevated price pressures.

The Fed has raised interest rates 11 times since March 2022 to combat inflation, bringing the federal funds rate to a 22-year high of 5.25%-5.50%. Recent data, including a stronger-than-expected July jobs report and sticky core inflation readings, have fueled speculation that the central bank may need to tighten policy further.

Collins’ comments follow remarks from other Fed officials, including Chair Jerome Powell, who have indicated that additional tightening could be warranted if inflation does not continue to ease. The September FOMC meeting is widely anticipated as a potential inflection point for the Fed’s policy trajectory.

Markets are pricing in a roughly 20% chance of a rate hike at the September meeting, according to CME Group’s FedWatch tool, down from earlier expectations of a near-certain move. The probability reflects investor uncertainty over whether the Fed will prioritize inflation control or risk over-tightening amid signs of a cooling labor market.

Collins’ stance aligns with the Fed’s broader strategy to balance inflation risks with economic growth concerns. Her remarks do not preclude a pause in September, but they reinforce the possibility of further tightening if data supports it.