Federal Reserve Bank of Boston President Susan Collins said further interest-rate increases are possible and borrowing costs may need to stay higher for longer than previously expected for the US central bank to achieve its 2% inflation goal.

“I expect rates may have to stay higher, and for longer, than previous projections had suggested, and further tightening is certainly not off the table,” Collins said Friday in remarks prepared for an event hosted by the Maine Bankers Association. 

Fed officials left their benchmark interest rate unchanged this week and signaled borrowing costs will likely remain at elevated levels for longer than estimated just a few months ago, after one more rate increase later this year. Chair Jerome Powell said policymakers can afford to “proceed carefully” after a series of rapid rate increases rolled out over the past 18 months. 

Collins, who does not vote in monetary policy decisions this year, said she “fully” supported the guidance offered in Fed officials’ quarterly economic projections, and said that the current phase of policy will require “considerable patience.”

The US economy has so far been resilient against the Fed’s historic tightening campaign, which lifted the target range for the federal funds rate from nearly zero in March 2022 to 5.25% to 5.5% in July, a 22-year high. In their latest economic forecasts, 12 of 19 Fed officials said they expect to raise rates once more this year. 

The forecasts also showed policymakers expect it will be appropriate to reduce the federal funds rate to 5.1% by the end of 2024, according to their median estimate, up from 4.6% when projections were last updated in June. 

Collins said inflation has moderated, but progress has been uneven and more time is needed to be sure price gains are on a steady downward path. While many households and businesses who built up savings or locked in lower rates on loans have been shielded against the Fed’s rate increases, demand is likely to cool as those savings are spent and debt-market activity picks up, she said. 

The Boston Fed chief said earlier this month officials will need to be patient as they assess economic data to figure out their next steps and that further tightening may still be required. 

She reiterated that sentiment Friday while also noting that there are uncertainties in the economic outlook.

“The risk of inflation remaining persistently high must be weighed against the risk that activity will slow more than expected,” Collins said.

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