Fed's Hammack: Time for the Fed to Act Through Rate Hikes

Cleveland Federal Reserve Bank President Beth Hammack made an explicit call for an immediate rate hike, becoming the latest policymaker to shift to a hawkish stance. In an interview, she noted that persistently high inflation is squeezing household budgets, and waiting would only make it harder to control prices in the future.

**Inflation Concerns Drive Hawkish Turn**

Hammack emphasized that the longer inflation remains above the 2% target, the more difficult it becomes to bring it down. Her biggest concern is that the public could gradually lose confidence that inflation will return to 2%, and once this mentality solidifies, it would force the Fed to take even more aggressive measures. She believes the current policy rate does not substantively restrict the economy, making it appropriate to act to bring inflation lower.

**Officials' Stances Converge**

Hammack's remarks do not stand alone. According to reports, Kansas City Fed President Schmid also hinted at supporting a hike on the same day, arguing that the rate level is not yet restrictive and that further efforts are needed to pull stubborn and sticky inflation back to target. Hammack herself voted against holding rates steady at the July policy meeting, advocating for a hike. Her latest comments further signal that mounting pressure within the Fed is growing in favor of tightening policy.

**Market Watches for Next Moves**

Although recent inflation data came in as expected, Hammack's hawkish comments underscore that the Fed's vigilance over price pressures is far from over. She suggested that the neutral rate may be higher than other officials' assessments, implying that the room for hikes could be greater than the market anticipates. This adds new turn of policy uncertainty to the Fed's future path.