Collins Backs Fed Hike and Sees Another Increase This Year

Boston Fed President Susan Collins supported the Federal Reserve’s quarter-point rate increase on September 16 and expects another hike before year-end. The move brought the federal funds target range to 3.75% to 4%.

Collins told The Associated Press that inflation had not cooled as she hoped. She also pointed to renewed Middle East fighting and the risk that energy costs will keep pushing prices higher.

Her view aligns with the Fed’s latest projections: policymakers’ median forecast points to one more quarter-point increase in 2026. The committee’s September decision was unanimous, despite the earlier shift toward higher rates after a period of holding them steady.

Collins also cited better hiring data as a reason the economy could absorb tighter policy. She said businesses in the Boston Fed’s region remain concerned about high costs, and some expect to pass those costs on to customers.

The Fed’s target is 2% inflation, but prices have remained above that level for more than five years, AP reported. Collins said she sees a greater chance inflation will stay well above target, strengthening the case for a more restrictive interest rate.

Higher short-term rates make borrowing more expensive and are intended to cool spending. Mortgage and other longer-term rates do not move in lockstep with the Fed’s target, but can respond to expectations about future policy.

Collins expects the Fed to keep rates unchanged in 2027, according to AP. She does not vote on rate decisions this year, though she takes part in policy meetings.

Investors will watch upcoming inflation and jobs data for clues about whether another increase is warranted. The Fed has said inflation remains elevated and cited geopolitical uncertainty in its September policy statement.