Boston Fed's Collins wants to raise rates 'a bit more' before the end of the year

Boston Federal Reserve president Susan Collins suggested Tuesday that she favors raising interest rates again this year to combat inflation.

"I … currently expect that it will be appropriate to raise rates a bit further before the end of the year to ensure a timely and durable return of inflation to the Committee's 2% target," Collins said in a speech in Boston. "However, my view of the need for further policy action, and the appropriate timing, will depend importantly on how the totality of incoming data shapes my outlook and the associated balance of risks."

Collins noted that inflation on a three-month annualized basis as measured by the Personal Consumption Expenditures index, excluding volatile food and energy, was only 2%. But she expects total and core inflation to again run above the Fed's 2% target in the coming months, given the r ecent jump in prices of refined energy products like jet and diesel fuel, as well as home heating oil.

Collins expects these price increases will keep inflation elevated in the transportation sector, lodging and related services —where energy is an important input — as well as in materials used to build data centers.

"Against this backdrop, it will be important to monitor whether elevated inflation remains largely confined to energy and AI build-out-related categories, while price growth continues to moderate elsewhere — or whether evidence of price pressures broadens," said Collins.

Collins' comments come ahead of a fresh reading on inflation as measured by the Consumer Price Index due out Wednesday. Economists expect CPI rose 3.6% in September. Excluding volatile food and energy, prices are expected to have risen 2.5%, or 0.2% month over month.

Elsewhere Tuesday, New York Federal Reserve president John Williams told Bloomberg he still sees one more interest rate hike as appropriate this year, but at the moment he doesn't believe it will be necessary for the central bank to increase rates again in 2027.

Markets are betting the Fed will hold rates steady at the end of the month, but raise again in December.

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram .