By Michael S. Derby
NEW YORK, Oct 13 (Reuters) - Boston Federal Reserve President Susan Collins said on Tuesday she believes the US central bank will need to raise interest rates again before the end of this year to lower high inflation.
Collins said she backed the rate hike by the central bank's policy-setting Federal Open Market Committee last month and currently expects "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."
"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," she said in the text of a speech to be delivered at a banking conference at the Boston Fed.
Collins said that with the economy and job market doing well, the Fed can focus its work on bringing inflation back down to its target after missing that goal for more than five years.
The Fed raised its policy rate by a quarter of a percentage point to the 3.75%-4.00% range last month.
Policymaker forecasts released at that meeting penciled in another increase by the end of 2026, although a range of Fed officials have in recent weeks strongly suggested the move will come in December and not at the October 27-28 meeting.
Collins was largely upbeat about the economic outlook, though she acknowledged there were risks.
The "most likely" path "continues to feature healthy GDP growth, with the labor market remaining near full employment," she said. "In this scenario, inflation gradually returns to 2%, as continued efficiency gains support the balance between demand and supply, and contribute to disinflation."
But pressure from tech investment to build AI infrastructure and the ongoing impact of tariffs and energy costs driven by the war in the Middle East could complicate the effort to lower inflation, she said.
"I expect both total and core inflation to again run above the Fed's 2% target in the coming months, given the recent jump in prices of refined energy products like jet and diesel fuel, and home heating oil," Collins added.
(Reporting by Michael S. Derby; Editing by Paul Simao)
