Federal Reserve Bank of Boston President Susan Collins has a warning for anyone expecting interest rate relief soon: the next move could go the other way.

What Collins said

Speaking in late August, Collins said the Fed “will be appropriate to tighten policy soon” if the data doesn’t show sustained progress on inflation. It’s a notably firmer statement than the “hold steady” posture she and other Fed officials had signaled earlier in the year.

The inflation numbers behind the warning

Collins pointed to core PCE inflation — the Fed’s preferred gauge — running at an estimated 3.3% annually in July, well above the central bank’s 2% target. She noted inflation has now stayed elevated for more than five years, and that price concerns are widespread among businesses and households across New England.

The Fed’s policy rate has been parked in a 3.5%-3.75% range since December, and Collins’ comments suggest growing internal pressure to move if incoming data doesn’t cooperate.

What’s keeping prices elevated

Collins attributed the persistent inflation to a combination of factors: tariffs from federal trade policy, elevated oil prices tied to the conflict involving Iran, and heavy spending tied to AI infrastructure investment nationally. Locally, that national inflation picture lines up with regional data showing Boston-area prices up 3.7% year-over-year, led by a 16% jump in energy costs.

Why it matters for Massachusetts

A rate hike would ripple quickly through a state economy already dealing with a cooling housing market, a pullback in venture funding for the innovation sector, and rising costs for small businesses. Higher borrowing costs would likely make an already-expensive Boston housing market tougher to navigate for both buyers and developers, and could further slow the lab and commercial construction financing that the state’s innovation economy depends on.

What Collins is watching

Her core concern isn’t just current inflation — it’s what happens if inflation stays elevated long enough that households and businesses start expecting it to persist. That kind of shift in expectations, she’s warned, makes inflation meaningfully harder to bring back down. Boston Made’s Economy desk will track upcoming Fed commentary and inflation data releases as the central bank weighs its next move.

Boston built its reputation as an innovation hub on a simple formula: world-class research institutions feeding a steady pipeline of venture-backed startups, especially in biotech. That formula is under more pressure than it’s faced in years.

Fewer companies are getting funded

Massachusetts’ share of national venture capital dollars has slipped, and the number of companies in the state receiving funding has fallen by 13%. For a regional economy where early-stage funding rounds often determine whether a lab-based startup can hire its next ten employees, that decline matters well beyond the venture world itself.

Empty lab space tells the same story

Much of the lab and life-sciences real estate built during the pandemic-era expansion now sits vacant at record levels. Developers who bet heavily on continued biotech growth in Cambridge, the Seaport, and along Route 128 are now absorbing that space more slowly than projected, which in turn has made landlords and lenders more cautious about financing the next wave of lab construction.

Layoffs compound the funding slowdown

The funding pullback is landing at the same time hiring in the sector has turned negative: 745 life sciences jobs were cut across 14 Massachusetts companies in the first quarter of 2026 alone. Fewer new funding rounds and fewer open positions together make it harder for laid-off scientists and executives to find their next role without leaving the state entirely — a dynamic that feeds directly into the broader population and talent-retention concerns policymakers have been raising this year.

The state’s response

Governor Healey’s $4 billion Mass Leads Act is designed specifically to shore up life sciences and technology, and the state’s new Competitiveness Council has been tasked with identifying regulatory and tax changes that could make Massachusetts more attractive to venture investors and the companies they fund. More than 30 companies have expanded in the state recently, evidence that the ecosystem hasn’t stalled entirely — but the funding and real estate data both point to a market that has cooled meaningfully from its pandemic-era highs.

What it means for founders and workers

For entrepreneurs building in Boston right now, the practical takeaway is that capital is more selective and runways matter more than they did two or three years ago. Boston Made’s Economy desk will continue tracking funding, lab vacancy, and hiring data across the innovation sector as it develops.

For a state built on world-class hospitals, universities, and a biotech cluster that draws talent from around the globe, 2026 has brought an uncomfortable question: is the Massachusetts economic model starting to crack?

People and companies are leaving

Massachusetts lost 33,340 net residents in the year ending July 2025, with young adults leading the departures. The exits haven’t been limited to individuals. SynQor relocated with roughly 250 jobs, Analogic moved about 500 positions out of state, and both Zipcar and Panera have shifted operations elsewhere. In January 2026 alone, ten companies eliminated a combined 905 jobs. The state is now one of only four in the country with fewer private-sector jobs than it had before the pandemic — a shortfall of roughly 24,000 jobs since January 2020.

Three pillars, all under strain at once

What makes this moment different from past slowdowns is that higher education, health care, and biotech — the three industries that have anchored the state’s economy for a generation — are all showing stress simultaneously.

Higher education: Twelve Massachusetts colleges have closed or merged over the past decade. UMass Chan Medical School’s PhD admissions fell from 73 students to just 13 in a single year, and Harvard is cutting its science PhD enrollment roughly in half.

Health care: Only six of the state’s nearly two dozen hospital systems turned a profit last year. Mass General Brigham has been managing a $250 million budget gap, while UMass Memorial lost $86 million in the first half of fiscal 2025 alone.

Biotech: Venture capital’s share of funding to Massachusetts life sciences companies has declined, the number of funded companies has dropped by 13%, and lab space built during the pandemic-era boom now sits vacant at record levels — a backdrop to the 745 biotech layoffs recorded in the first quarter of 2026 alone.

Federal policy adds pressure

Boston University economist Mark Williams has estimated that tariffs alone could eliminate nearly 80,000 Massachusetts jobs and cost the state $1 billion in tax revenue. State officials have also flagged federal funding being redirected toward other states, along with a proposed $424 million in Medicaid cuts that would hit Massachusetts hospitals directly.

The cost-of-living squeeze

Housing remains the biggest single driver of people leaving the state, compounding the pressure on employers trying to hire. A four-year degree at a private Massachusetts university now commonly exceeds $400,000 all-in, and the state has the third-highest electricity rates in the country — both of which show up in household budgets long before they show up in state economic data.

What the state is doing about it

Governor Maura Healey’s administration has rolled out a $4 billion Mass Leads Act aimed at the life sciences and technology sectors, a $400 million DRIVE Initiative, and a new Competitiveness Council, while pointing to more than 30 companies that have recently expanded in the state. House Ways and Means Chair Aaron Michlewitz has highlighted resilience in state revenue numbers as a counterpoint to the more alarming headlines.

Those efforts have run into resistance, though: a broader tax-cut package was significantly scaled back, new revenue-raising proposals didn’t survive the legislative process, and a commercial property tax proposal from Boston Mayor Michelle Wu was rejected in the Senate.

Where this leaves Massachusetts

None of this means the state’s economy is collapsing — job growth is still outpacing the national average on a monthly basis, and the “millionaires tax” continues to generate billions more than originally projected, evidence that high earners aren’t fleeing en masse. But the simultaneous strain across education, health care, and biotech, layered on top of a real (if modest) population decline, is a meaningfully different economic story than the one Massachusetts told about itself for most of the past two decades. Boston Made’s Economy desk will keep following each of these threads as new data comes in.