Boston Fed President Susan Collins said she supported last week's quarter-point interest rate increase, which lifted the benchmark rate to roughly 3.9%, and expects the Fed to raise rates once more before the end of the year. Collins told the Associated Press she expects borrowing costs to remain on hold through 2027, citing a lack of hoped-for inflation progress, geopolitical pressures on energy, the resumption of fighting in the Middle East in August, and improved hiring figures. She added that companies across her district, which spans Massachusetts, Connecticut, Maine, Rhode Island, and Vermont, are reporting cost pressures and signaling they may pass them to consumers, a dynamic that could keep inflation elevated. Chicago Fed President Austan Goolsbee struck a more cautious tone the same day, saying the Fed may need to cause economic pain to bring inflation down, placing him in direct tension with Fed Chairman Kevin Warsh, who argued the central bank can tame inflation without damaging the job market. Goolsbee said the Fed might ultimately need to go beyond the single additional hike policymakers projected last week if data show inflation is driven by demand; neither he nor Collins is a voting member of the rate-setting committee this year, with Goolsbee's voting rotation returning next year and Collins's in 2028.
Collins backed the quarter-point hike to ~3.9% and expects one more hike this year, keeping the policy rate higher.
Hawkish Fed stance (hike backed, one more expected, no cuts through 2027) pushes the 10Y yield up.
