By Reuters, May 13, 2026
Boston Federal Reserve President Susan Collins said Wednesday that the Fed may need to raise interest rates again if inflation pressures do not ease. Speaking to the Boston Economic Club, Collins said that although tighter policy is not her baseline forecast, she can imagine a scenario where further tightening is needed to return inflation sustainably to the 2% target in a timely way.
Collins stressed that much of the monetary outlook hinges on how long the conflict in West Asia lasts. The longer the fighting continues, she said, the greater the risks to inflation and global supply chains. Even a quick resolution, she warned, would likely leave supply chains disrupted for some time, and prolonged conflict would raise the chance of larger negative spillovers to the U.S. economy.
She described the current monetary stance as “well positioned” to adjust to evolving risks and said it will likely be important to keep policy slightly restrictive for some time. While the U.S. economy is better placed than in the past to handle energy shocks, Collins noted that more than five years of above-target inflation has reduced her willingness to “look through” another supply-driven price spike. Controlling inflation expectations, she said, is especially important today.
On the economy, Collins pointed to resilient demand, solid growth and a labor market that may see only a modest rise in unemployment amid low hiring and low firing. She does not expect very high inflation to ease this year; declines could begin in 2027. Given the current backdrop, she said the odds of scenarios featuring higher, more persistent inflation or worse labor-market outcomes have risen.
Collins is not a voting member of this year’s Federal Open Market Committee, which left the benchmark federal funds rate unchanged last month in the 3.50%-3.75% range. Federal officials have pulled back from earlier prospects of rate cuts later this year, as war-related inflation pressures and surprisingly strong job growth in April have given policymakers reason to keep their focus on inflation. Some officials have even signaled that higher rates may be required to bring inflation back to 2%.
In a post-speech Q&A, Collins addressed the impending leadership transition at the Fed, with Kevin Warsh expected to replace Jerome Powell as chair in the coming days. Powell’s term as chair expires this week; Collins said Powell plans to remain on the Board of Governors for a time while awaiting developments related to legal challenges and the broader political environment surrounding the central bank.