US rates need to rise soon absent evidence of ongoing drop in inflation, Fed's Collins says

Economists polled by Reuters expect that new inflation data on Wednesday will show that the Personal Consumption Expenditures price index, excluding food and energy, increased at a 3.3% annual rate in July, unchanged from the month before and well above the Fed's 2% target. Core PCE, considered a guide to future headline inflation, has risen steadily since last year, with Fed officials citing the Trump administration's import tariffs, higher oil prices due to the war with Iran, and now massive investments in artificial intelligence as reasons for the increase.

The Fed's policy rate, currently in the 3.5% to 3.75% range, has been on hold since December as officials waited for inflation to ease.

Collins said she still thinks that may happen, but, with inflation above target for more than five years now, she also said the Fed cannot wait forever, and is concerned that further time missing the inflation goal could shift consumer expectations in a way that makes the inflation goal harder to achieve.