Fed officials cite inflation persistence in defending rate hike
Two Federal Reserve leaders outline reasons for last week's quarter-point increase and warn of painful trade-offs ahead.
What to know
- Two regional Fed presidents publicly justified the quarter-point rate hike to 3.9% as necessary to combat persistent inflation that has missed the Fed's 2% target for over five years.
- Both officials cited supply shocks—particularly the Iran war and its effect on oil prices—as drivers of inflation pressures that require rate hikes rather than passive waiting.
- Goolsbee explicitly warned that fighting inflation will require accepting higher unemployment, directly contradicting Fed Chairman Warsh's prior claim that rate increases need not harm the labor market.
- Collins signaled a second rate hike is likely later in 2026, while noting businesses in her district expect rising costs will force them to pass increases to consumers, further pressuring inflation.
Susan Collins President, Federal Reserve Bank of Boston
Austan Goolsbee President, Chicago Federal Reserve Bank
Kevin Warsh Federal Reserve Chairman
How it unfolded 2 developments, newest first · click a bar or a number to jump articlesposts
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Goolsbee contradicts Warsh on pain from rate increases
Goolsbee's explicit warnings that fighting inflation will be painful directly contradict Fed Chairman Kevin Warsh's remarks from the prior week suggesting rate hikes need not harm labor markets.
“It's going to be painful. It would necessarily be painful.”
— Austan Goolsbee -
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Goolsbee warns rate hikes will likely increase unemployment — Austan Goolsbee, president of the Chicago Fed, stated the central bank may need to cause economic pain through higher joblessness to combat stubborn inflation driven by persistent supply shocks like the Iran war.
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Collins defends rate hike, cites inflation concerns and Middle East escalation
Susan Collins, president of the Federal Reserve Bank of Boston, told the Associated Press that persistent inflation and August's Middle East conflict renewal justified the rate increase. She noted inflation has not hit the Fed's 2% target for over five years and expects a second rate hike later in 2026.
“I did not see the inflation progress I was hoping to see. Geopolitical developments suggest that we could continue to see additional pressures push on the energy side.”
— Susan Collins -
first by AP News, 4d ago
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background
Federal Reserve raises benchmark interest rate by quarter-point — The Fed lifted its benchmark interest rate to approximately 3.9%, marking the decision that prompted officials' subsequent comments.