Susan M. Collins. Photo courtesy of the Federal Reserve Bank of Boston.

The president of the Federal Reserve Bank of Boston thinks interest rates will have to rise by more than half a percent this year and stay high to make sure inflation is kept under control.

Demand for goods – and their prices, in some cases – is receding, Susan M. Collins told a conference the bank hosted at its headquarters Thursday morning. And energy prices are coming down along with rent growth, she added, but wages are still growing faster than 2 percent per year and both job vacancies and the rate at which people quit jobs are both still high – signs, she said, that demand for labor remains too strong.

“While it is promising to see the effects of higher rates starting to spread from the most interest-sensitive sectors to the broader economy, more is required to ensure a steady path toward our inflation target. As monetary policymakers, restoring price stability remains our imperative. Thus, I anticipate the need for further rate increases, likely to just above 5 percent, and then holding rates at that level for some time,” Collins said.

After the last meeting of Federal Open Market Committee, the Federal Reserve issued guidance predicting that its benchmark short-term rate will reach a range of 5 percent to 5.25 percent by the end of 2023.

But Collins also cautioned that it’s time the FOMC, on which Collins sits, slows the pace of interest rate increases. Over the last year, the Fed has raised its benchmark interest rate precipitously, from between 0 percent and 0.25 percent in early March 2022 to between 4.25 percent and 4.5 percent in mid-December.

“More measured rate adjustments in the current phase will better enable us to address the competing risks monetary policy now faces – the risk that our actions may be insufficient to restore price stability, versus the risk that our actions may cause unnecessary losses in real activity and employment,” she said. “I am well aware that, as with inflation, the costs of higher unemployment are disproportionately borne by people of color and economically vulnerable groups.”

The FOMC finishes its next meeting Feb. 1.