Fed’s Collins backs 25-basis-point hike as inflation risks rise

BOSTON, 23 SEPTEMBER 2026 —

Federal Reserve Bank of Boston President Susan Collins has called for another quarter-point interest rate increase, citing elevated inflation risks and stronger-than-expected labor market conditions, as markets prepare for the US central bank’s first hike since July 2023.

In a LinkedIn post, Collins said a “somewhat more restrictive federal funds rate will help ensure that inflation durably returns to target,” noting that upside risks to inflation had grown while unemployment remained low. Her stance—though non-voting at present—aligns with growing expectations of further tightening, with CME Group’s FedWatch tool showing a 53.1% probability of a 25-basis-point increase at the upcoming meeting.

Collins’ argument follows five and a half years of inflation running above the Fed’s 2% target. “With the labor market on a better footing, monetary policy can focus on a timely return to price stability,” she wrote, emphasizing that wage growth and tight hiring conditions justified a more restrictive stance.

The Fed’s October meeting left markets divided, but Collins’ comments reinforce hawkish signals from other officials. European Central Bank Executive Board member Philip Lane separately warned that a “second wave of rising energy prices” would keep inflation “higher for longer,” pressuring food, electricity, and broader goods sectors. He told Le Temps that a larger autumn shock could weigh on the eurozone economy, though the ECB’s baseline outlook remains uncertain.

For Malaysian investors, a Fed hike would tighten global liquidity, potentially strengthening the US dollar and pressuring risk assets. Foreign portfolio investments in Malaysia—sensitive to US monetary shifts—could face outflows, while Bank Negara Malaysia has previously cautioned against volatility in capital flows.

Collins’ position reflects a broader shift among Fed officials toward prioritizing inflation control over growth concerns. Her emphasis on labor market resilience—with unemployment near multi-decade lows—suggests policymakers may accept higher borrowing costs to cool demand.

The upcoming Fed decision will determine whether the US central bank resumes tightening after a pause in 2023. If confirmed, the move could reshape risk appetites across Asia, with Malaysia’s equities and ringgit particularly exposed to shifts in global liquidity.

While Bank Negara has tools to manage volatility, external monetary conditions—led by the Fed—will remain a key factor for Malaysia’s economic outlook in the coming months. The central bank has previously signaled vigilance against capital flow disruptions, but the extent of any impact will depend on the Fed’s next steps.

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