Rate Hike Decision Driven by Geopolitical Pressures

Two Federal Reserve officials have come forward to explain their reasoning behind supporting a rate hike last week. Susan Collins, president of the Federal Reserve Bank of Boston, said that the renewed combat in the Middle East in August was a key factor in her decision to raise borrowing costs.

Collins agreed with the Fed's decision to lift its benchmark interest rate by a quarter-point to about 3.9%, and also expects rates to remain unchanged next year.

She cited geopolitical developments as a reason for expecting additional pressures on energy prices, which could push inflation above the Fed's 2% target.

Austan Goolsbee, president of the Chicago Fed, echoed Collins' sentiments, saying that supply shocks, including higher oil prices from the Iran war and tariffs, have driven up inflation.