Fed Officials Pin Interest Rate Hike on Inflation Pressures and Geopolitical Tensions

Two Federal Reserve officials have spoken out about their reasoning behind last week's interest rate hike. Susan Collins, president of the Federal Reserve Bank of Boston, said stubbornly high inflation and geopolitical developments led her to support the increase in borrowing costs.

Collins noted that data showing improved hiring also played a role in her decision to support a rate hike. She stated that solid job gains can signal that the economy may be able to withstand higher rates.

Austan Goolsbee, president of the Chicago Fed, also spoke about inflation pressures arising from supply shocks and strong business and consumer spending. He said the central bank may have to cause economic pain in the form of higher unemployment to combat stubbornly high inflation.

Goolsbee stated that the increases are needed to lower consumer and business demand to a level consistent with reduced supply, which should bring inflation back to the Fed's 2% target. He emphasized that 'it's going to be painful' for employment and economic growth in the short run.