Fed Officials Warn "Inflation Risks Remain"... AI and Manufacturing Drive Price Pressures

Senior officials at the US Federal Reserve warned that inflationary pressures remain high.

Susan Collins, President of the Federal Reserve Bank of Boston, stated on September 22 (local time) in a post on LinkedIn, "I supported last week's decision by the Federal Open Market Committee (FOMC) to raise the Fed's policy interest rate by 0.25 percentage points."

LinkedIn of Susan Collins, President of the Federal Reserve Bank of Boston.

President Collins assessed, "Considering all currently available information, I believe the likelihood has increased for a scenario in which inflation will remain well above 2% going forward."

She continued, "Although the upside risks to inflation have grown, overall labor market conditions have somewhat strengthened, and the unemployment rate remains low," adding, "However, I recognize that conditions perceived on the ground vary significantly by region and industry."

President Collins emphasized, "Now that the labor market is on a more stable footing, monetary policy can focus on the timely restoration of price stability—and this is especially important given that inflation has been excessively high for five and a half years." She added, "A somewhat more restrictive federal funds rate will help inflation return to the target level in a sustainable manner."

President Collins does not hold voting rights in this year's FOMC. In her statement, she did not specify the need for or the number of additional rate hikes.

Richmond Fed President Also Warns on Inflation: "US Economy Resilient, Price Pressures Buoyed by AI and More"

Tom Barkin, President of the Federal Reserve Bank of Richmond, also warned during a speech at the CFA Society Baltimore that day, that the US economy may be getting even stronger, underpinned by steady consumption and broad-based growth drivers, and that inflation poses a bigger risk than employment.

President Barkin cautioned that recent price increases are not limited to temporary supply shocks, such as energy prices and tariffs. He explained that growth continues not only in investments in artificial intelligence (AI), but also in areas such as defense and manufacturing, and that robust consumer demand is sustaining price pressures.

He stated, "The risks associated with inflation remain greater than those associated with maximum employment. That's why we raised the policy rate at last week's meeting." However, regarding the possibility of additional hikes, he left his position open, saying, "We need to wait and see." President Barkin also does not have a voting right in the FOMC this year.

Meanwhile, at the September FOMC regular meeting, the Fed raised the target range for the policy rate from 3.50–3.75% per annum to 3.75–4.00%, an increase of 0.25 percentage points. This was the first rate hike in more than three years since July 2023. The policymakers' rate projections reflected the possibility of one more rate hike within the year, but Fed Chair Kevin Warsh did not provide a specific signal regarding the path for future rates.

This content was produced with the assistance of AI translation services.