Collins Backs Higher Borrowing Costs
Susan Collins, president of the Federal Reserve Bank of Boston, supported the central bank’s quarter-point interest rate increase to about 3.9%. Persistent inflation and renewed combat in the Middle East shaped her position.
Collins said inflation had not improved as she hoped. She also saw a greater risk that energy pressures could keep inflation above the Fed’s 2% target. That goal has remained unmet for more than five years.
Her projections include another increase later this year, followed by unchanged rates next year. Improved hiring also supported her view because solid job growth suggests the economy can withstand higher borrowing costs.
Businesses Face Rising Costs
Companies across Collins’s New England district continue to report concern about high costs. Many expect to pass those increases to customers, a step that could raise measured inflation.
Austan Goolsbee, president of the Chicago Fed, likewise emphasized repeated supply shocks. He cited higher oil prices from the Iran war and tariffs, alongside strong business and consumer spending.
Neither official votes on rate decisions this year, although both participate in policy meetings. Goolsbee will vote next year, while Collins is scheduled to vote in 2028.
Inflation May Bring Economic Pain
Goolsbee argued that persistent supply shocks leave the Fed little choice but to raise rates. The goal is to reduce demand until it aligns with constrained supply and inflation returns to 2%.
That adjustment could increase unemployment, creating a difficult trade-off between stable prices and maximum employment. He warned that bringing inflation down in the short term would be painful.
His view differed from Chair Kevin Warsh’s statement that controlling inflation need not damage the labor market. Previous rate increases in 2022 and 2023 lowered inflation without causing a major rise in unemployment or a recession.
Still, Goolsbee said one additional increase may not be enough if strong demand is also driving inflation. He pointed to surging investment in artificial intelligence data centers as a possible source of demand pressure.
References
Rugaber, C. (2026, September 21). Federal Reserve official says inflation persistence led her to support interest rate hike. AP News. https://apnews.com/article/inflation-goolsbee-federal-reserve-rates-5acf1f7e4f38ac77329fa0b9aaddd30f