Boston Fed President Susan Collins said she supported last week’s 25bp rate hike and expects one additional increase later this year, citing disappointing inflation progress and renewed energy risks from the Middle East conflict. Collins said, “I did not see the inflation progress I was hoping to see,” while geopolitical developments suggested further pressure could emerge from energy prices. Together, those factors increased the likelihood of scenarios in which inflation becomes “stuck above 2%,” strengthening the case for moving policy somewhat further into restrictive territory.
Collins also pointed to improved hiring as a factor supporting last week’s decision, suggesting the economy is better positioned to absorb higher borrowing costs. At the same time, businesses across the Boston Fed district continue to report elevated costs, with many expecting to pass those increases on to customers. That keeps the focus on whether higher energy and other input costs broaden into more persistent inflation rather than remaining isolated price shocks. Her reasoning therefore combines stubborn underlying inflation with the risk of renewed cost pass-through, rather than relying solely on headline energy prices.
Her projected policy path nevertheless appears relatively contained. After another hike in 2026, Collins said she expects the Fed to keep rates unchanged next year, pointing to a tightening strategy centered on reaching a sufficiently restrictive setting and then holding it rather than extending the hiking cycle indefinitely. Collins, who is not an FOMC voter this year, therefore offers a comparatively clear one-more-hike-then-hold profile: inflation has not improved enough to justify stopping yet, but her outlook does not imply an open-ended series of further increases.
Key Takeaways
- Boston Fed President Susan Collins supported last week’s 25bp hike and expects one additional rate increase later in 2026.
- Collins said, “I did not see the inflation progress I was hoping to see,” while renewed Middle East tensions added upside risk through energy prices.
- Her main concern is that inflation could become “stuck above 2%”, rather than simply experiencing another temporary energy-driven increase.
- Improved hiring also supported her decision, suggesting the economy may be able to absorb somewhat tighter policy without significant labor-market deterioration.
- Businesses in the Boston Fed district continue to report elevated costs and potential pass-through to customers, adding another channel through which inflation could remain persistent.
- Collins nevertheless sees a relatively contained tightening path: one more hike in 2026, followed by unchanged rates through 2027, rather than an extended hiking cycle.
