Beth Hammack urges Fed rate hike to fight above-3% inflation

Cleveland Federal Reserve Bank President Beth Hammack reiterated her call Thursday for an immediate interest rate increase, arguing that inflation running above 3% is too high and that current policy is not doing enough to bring it down, according to Reuters.

“I think that we need to act now because I think we need to bring inflation back down to that 2% objective faster than what a longer-term glide path would say with interest rates at this level,” Hammack said at the Dayton Area Chamber of Commerce in Dayton, Ohio.

Hammack said she welcomes the recent softening in inflation data but does not trust it to continue. “I love to see that those numbers are coming in lower — that’s a good thing — but 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% number,” she said, according to Bloomberg.

She also warned that strong business demand for credit could add to price pressures. Companies’ appetite to raise funds and keep investing is pushing prices upward, she said, meaning the Fed must tighten its stance enough to bring inflation “from this above-3% number back down to that 2% objective.” She cited contacts in the Cleveland district, including a Cincinnati retailer raising prices preemptively and workers with steady jobs relying on food banks.

The Fed’s rate-setting panel is expected to announce its next decision on interest rates in mid-September, according to NBC News.

The day of Hammack’s comments, the Bureau of Labor Statistics released its July producer price index reading, which showed no change from the prior month. That reading lifted equities and prompted bond traders to pull back on wagers that the Fed would raise rates before year’s end, according to NBC News.

Hammack dissented at the Fed’s July meeting along with Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan, all three preferring a quarter-point rate increase. The full committee split 9–3, with the majority opting to hold the federal funds rate at its existing 3.5%–3.75% target range. At the time, Hammack said she saw inflationary pressures coming from the demand side of the economy, not just supply disruptions, and that business contacts were reporting widening rather than easing price pressures.

It has been more than five years since the Fed hit its 2% inflation target, Hammack noted Thursday. “If it takes us another three or four years to get there, is that OK?” she said.