A Fed official warns inflation broadening or tariff effects could force rate increases despite current policy expectations.
Boston Federal Reserve President Susan Collins indicated the central bank may need to raise interest rates if inflation pressures widen. She cited rising inflation expectations, tariff pass-through, and price pressures beyond energy as key risks to the outlook.
Collins noted that current policy could become less restrictive as inflation erodes the real Fed funds rate. She advocated for more neutral Fed communications, removing language suggesting the next move would be a cut. While her base case remains easing inflation, she acknowledged the likelihood of sustained price pressures has increased.
The remarks highlight growing concerns over persistent inflation, even as productivity gains could help mitigate some pressures. Markets have largely priced in rate cuts this year, but Collins’ comments suggest a shift in tone toward a more data-dependent approach.