Fed Officials Warn Rate Hikes May Bring Economic Pain

A top Federal Reserve official said that raising interest rates will be necessary to combat stubborn inflation. Susan Collins, president of the Federal Reserve Bank of Boston, stated that she supports the Fed's decision to raise borrowing costs by a quarter-point to about 3.9%. The rate hike was made last week, and Collins expects another increase later this year.

Collins pointed out that high inflation has not been reduced to the Fed's target of 2% in over five years. She also mentioned geopolitical developments, such as the war in Iran, which have pushed up energy prices and added pressure on inflation.

Austan Goolsbee, president of the Chicago Fed, echoed Collins' concerns about supply shocks driving inflation. He stated that the central bank may need to cause economic pain through higher unemployment to combat stubbornly high inflation.