Boston Fed’s Collins Says Another Rate Hike This Year Is Likely as Inflation Pressures Persist

Susan Collins, president of the Federal Reserve Bank of Boston, said another increase in the benchmark interest rate is likely before year-end as policymakers seek to contain inflation.

Bloomberg reported on October 13 that, at a banking conference hosted by the Boston Fed, Collins said she expects “it will likely be appropriate to raise rates a bit further before the end of the year” to return inflation to the Federal Open Market Committee’s 2% target in a timely and sustainable way. She added that whether another hike is needed, and when it would come, will depend on upcoming economic data.

The Federal Reserve raised its benchmark rate by 0.25 percentage point at its September FOMC meeting. At the time, all 19 policymakers supported the move, and Fed Chair Kevin Warsh said it was intended to remove some of the accommodative stance of monetary policy. Economic projections released last month also showed the median rate outlook among Fed officials pointing to one more increase this year.

Even so, some Fed officials have argued that the timing of any additional increase should be determined carefully. Some policymakers said last month’s hike gave them room to assess economic conditions. The Fed is scheduled to hold its next FOMC meeting in Washington on October 27-28.

Collins said the U.S. economy is likely to continue growing, with the labor market remaining near full employment. Higher productivity is expanding the economy’s supply capacity, helping keep demand and supply in balance and allowing inflation to gradually converge with the 2% target. She said strong economic activity does not necessarily mean the economy is overheating.

Still, she warned that rising investment in artificial intelligence and higher energy prices could complicate the inflation outlook. A surge in AI-related investment could spur household spending and labor demand, prolonging a period in which inflation remains above target. Tariff burdens and higher energy prices stemming from a prolonged war in Iran could also add to price pressures.

Collins said it is important to closely monitor whether elevated inflation is confined to energy and AI infrastructure-related sectors or spreads to other parts of the economy. Any decision on another rate increase will depend on future inflation trends and incoming economic data.