- Boston Fed's Susan Collins supports recent rate hike amid inflation concerns
- Inflation outlook worsens, prompting calls for restrictive monetary policy
- Fed raised rates to 3.75%-4.00% to contain inflation pressures
Boston Federal Reserve President Susan Collins has backed last week's interest-rate increase, warning that the US economy could face a prolonged period of inflation above the central bank's 2% target.
In a statement published Tuesday, Collins said the inflation outlook had become more concerning and argued that keeping monetary policy somewhat restrictive would help prevent price pressures from becoming entrenched.
As per Reuters reports, her comments come days after the Federal Reserve lifted its benchmark policy rate by 25 basis points to 3.75%-4.00%.
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The move was aimed at containing inflation, while policymakers' latest projections also pointed to the possibility of another rate increase before the end of 2026.
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Collins, however, stopped short of saying whether she would support another hike. She is also not a voting member of the Federal Open Market Committee this year, meaning her view does not directly determine the committee's current rate decisions.
The inflation challenge has become more complicated because some of the latest price pressures are being driven by supply disruptions rather than excessive demand.
The conflict involving the US and Israel with Iran has added to those risks, particularly through its potential impact on energy and other costs.
That creates a difficult choice for the Fed. Higher interest rates can weaken demand and help control persistent inflation, but they have limited power over price increases originating from supply shocks.
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Collins said the labour market is now on firmer footing, giving policymakers more room to concentrate on restoring price stability. She also pointed to the importance of ensuring that inflation does not remain significantly above the Fed's target for an extended period.
The latest remarks suggest that inflation remains a key consideration for the Fed even as policymakers assess the impact of previous rate increases.
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