Boston Fed president signals upside inflation risks after backing the September rate increase
Boston Federal Reserve President Susan Collins said Tuesday she supported last week's decision to raise the federal funds rate by 25 basis points and warned that inflation could remain meaningfully above the Fed's 2% target. That's a hawkish signal that narrows the outlook for rate relief in the months ahead.
Writing on LinkedIn, Collins said she "now see[s] an increased likelihood of future scenarios in which inflation remains notably above 2%."
The move brings the federal funds rate target range to 3.75%-4.00%, breaking a five-meeting hold streak that had kept the rate unchanged through most of 2026.
Collins, who participates fully in Federal Open Market Committee (FOMC) discussions but is not a voting member this cycle, offered no ambiguity on direction.
"A somewhat more restrictive federal funds rate will help ensure that inflation durably returns to target," she wrote.
Melissa Cohn of William Raveis Mortgage highlighted that when markets see the Federal Reserve effectively tackling inflation, bond yields can decline, potentially bringing mortgage rates down despite higher benchmark rates.https://t.co/E3CHIOsyLQ
— Mortgage Professional America Magazine (@MPAMagazineUS) September 18, 2026
Labor market strength extends the tightening timeline
Collins cited a labor market that has held firmer than expected, describing conditions as "a bit stronger overall" with unemployment remaining low, though with variation across regions and sectors.
"With the labor market on a better footing, monetary policy can focus on a timely return to price stability, especially after five and a half years of too high inflation," she wrote.
Those concerns had already surfaced among mortgage professionals before the September 15–16 meeting.
Melissa Cohn, Regional Vice President of William Raveis Mortgage and a 44-year industry veteran, told Mortgage Professional America that conditions warranted a move.
"Inflation is clearly going in the wrong direction, oil prices are surging, and there's no immediate sign of a positive change in inflation figures," Cohn said. "It's likely to get worse before it gets better."
Mike Fratantoni, Senior Vice President and Chief Economist at the Mortgage Bankers Association (MBA), told MPA in July that the three dissenters at that month's meeting — each of whom had preferred an immediate hike — signalled where the committee was heading.
"The three dissents at this meeting, with each of these dissenting members preferring to hike rates now, indicates that the Fed is likely moving into a hiking cycle soon," he said.
October hike: markets call it too close to call
Attention now shifts to October. CME Group's FedWatch tool shows 53.1% of market participants expecting another 25-basis-point increase at the next FOMC meeting, effectively a coin flip, and a measure of how uncertain the rate path remains.
Collins' post came the same day European Central Bank executive board member Philip Lane warned that rising energy prices could keep global inflation elevated for longer, adding an international dimension to domestic rate concerns.
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