Fed's Collins: Rates May Rise Soon Unless Inflation Shows Sustained Decline

The US Federal Reserve may need to raise interest rates soon if inflation data does not show a continued decline, according to Boston Fed President Susan Collins.

Collins said that current policy rate will continue to push down prices and help with gradual disinflation, aided by the recent rise in longer-term bond yields and other factors.

However, she emphasized that evidence of sustained inflation progress is necessary for the Fed to hold off on tightening policy. 'Should evidence of sustained inflation progress not materialize, I believe it will be appropriate to tighten policy soon,' Collins wrote.

Economists expect new inflation data on Wednesday to show a 3.3% annual rate in July, well above the Fed's 2% target. Core PCE has risen steadily since last year due to various factors including import tariffs, higher oil prices, and investments in artificial intelligence.