Cleveland Fed Chief Warns Higher Rates May Be Needed to Curb Inflation
Fed's Hammack signals tighter monetary policy may be required to prevent an inflationary mindset from becoming entrenched.
Cleveland Federal Reserve President Beth Hammack cautioned that interest rates may need to remain elevated — or move higher — to prevent an "inflationary mindset" from taking root in the broader economy, according to remarks reported Friday.
Hammack's comments reflect a hawkish stance within the Federal Open Market Committee at a moment when policymakers are weighing the balance between slowing price growth and avoiding unnecessary drag on employment and output. Her warning underscores concern that prolonged inflation expectations, if left unchecked, can become self-fulfilling.
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The Cleveland Fed president indicated that tighter monetary policy would be the appropriate tool to bring inflation back toward the central bank's 2% target. The remarks suggest she is not yet convinced that current rate levels are sufficiently restrictive to achieve that goal sustainably.
Hammack's signal adds to a chorus of Fed officials who have pushed back against expectations of near-term rate cuts, even as financial markets have periodically priced in easing. The Fed has held its benchmark rate in a restrictive range as it monitors incoming economic data for signs that inflation is durably declining.
The comments arrive amid continued uncertainty about the inflation trajectory, with some price pressures proving stickier than anticipated. Continue reading at Finance.
