Collins Backs Rate Hike, Flags Persistent Inflation Risks Ahead

Boston Federal Reserve President Susan Collins has backed the US central bank's decision to raise interest rates last week, citing growing risks that inflation could remain above the Federal Reserve's 2% target.

Collins said the improving labour market gives monetary policymakers greater scope to focus on restoring price stability. She also indicated that a somewhat more restrictive monetary policy stance would be needed to ensure inflation returns to the Fed's target on a sustained basis.

The Federal Reserve raised its benchmark interest-rate target by 25 basis points last week to a range of 3.75%-4.00%, marking its first rate increase in more than three years. Policymakers' latest projections also indicated that another quarter-point increase could come before the end of 2026.

Fed Chair Kevin Warsh has not endorsed that projected path for rates, maintaining a reluctance to provide explicit guidance on future monetary policy. Collins did not indicate whether she favours another increase.