Cleveland Fed President Beth Hammack reiterated Thursday that Fed should raise rates now, arguing current policy is not providing enough restraint to bring inflation back to 2% quickly enough. Speaking at Dayton Area Chamber of Commerce in Dayton, Ohio, Hammack pointed to businesses still eager to borrow and invest, warning that excessive growth could add to price pressures. “We need to make sure that we’ve got some amount of restraint coming from policy,” she said, so inflation can move from above 3% back toward Fed’s objective.
Hammack acknowledged that inflation data have improved over past two months, but said that was not enough to convince her disinflation will persist. “I don’t have confidence that we’re going to continue to see that or that we’re going to see them low enough that it’s going to bring us back down to that 2%,” she said. She also challenged idea that Fed can tolerate a very gradual return to target, asking, “If it takes us another three or four years to get there, is that OK?” Her concern is not simply whether inflation eventually reaches 2%, but whether current policy gets there fast enough to preserve credibility.
That leaves Hammack firmly on hawkish side of Fed debate after dissenting at July meeting in favor of higher rates. She cited businesses pre-emptively raising prices because they expect future cost pressures, as well as household strain from high gasoline and living costs, as evidence that prolonged inflation carries real consequences. Her conclusion was explicit: “I think that we need to act now,” because current rates imply too slow a glide back to target. For markets, message is that two softer inflation reports have not changed her preference for immediate tightening.
Key Takeaways
- Cleveland Fed President Beth Hammack reiterated that Fed should raise rates immediately, arguing current policy is not restrictive enough to return inflation to 2% quickly enough.
- Hammack said businesses are still eager to borrow and invest, which could keep demand strong and add to price pressures.
- She acknowledged inflation has improved over past two months but said, “I don’t have confidence that we’re going to continue to see that.”
- Hammack challenged a slow return to target, asking, “If it takes us another three or four years to get there, is that OK?”
- She also warned persistent inflation may be changing business pricing behavior, with firms raising prices in anticipation of future cost pressure.
- Her conclusion was explicit: “I think that we need to act now.” That keeps her firmly among Fed’s most hawkish voices after dissenting for a hike in July.
