Boston Fed President backs recent rate hike amid persistent inflation and Middle East conflict

In an interview, Susan Collins, head of the Boston Fed, said the Fed’s decision to raise its benchmark rate by a quarter point to about 3.9% was driven by the persistence of high inflation and the resurgence of fighting in the Middle East in August. She added that the combination of supply-side shocks, solid consumer spending and improving labor market conditions made further tightening likely, with a possible additional hike later in the year.

Collins expects the Fed to hold rates steady through next year. She highlighted that firms in her district—Massachusetts, Connecticut, Maine, Rhode Island and Vermont—remain worried about rising costs and may pass them on to customers, keeping inflation above the 2% target. While she does not have a voting right on rate decisions until 2028, she participates in the policy discussions. Collins also referenced that better hiring data supports the case for higher rates, as it suggests the economy can absorb tighter monetary conditions.