Fed's Hammack: It's Time to Act with Rate Hikes, Waiting Will Create Pain
Key Takeaways
- •Beth Hammack said it is time to act with rate hikes and that waiting would create pain, repeating comments from the previous day.
- •She expects inflation to end the year around 3%, well above the Fed's longer-run 2% target.
- •Hammack does not consider current financial conditions restrictive, which underpins her case for raising rates.
- •A rate hike would require majority support on the FOMC, so one president's advocacy cannot change policy by itself.
- •Her remarks come ahead of a closely watched speech by Warsh scheduled for 10 a.m. ET.
Cleveland Fed President Beth Hammack said it is time to act with rate hikes, arguing that waiting would create pain, in remarks that repeated comments she made the previous day.
Key points from Hammack's comments:
- She expects inflation to end the year around 3%.
- She does not see current financial conditions as restrictive.
- Communicating Federal Reserve issues to the public is part of the job.
- Fed credibility depends on delivering on the dual mandate.
Hammack's call for hikes stands out because it comes at a moment when much of the FOMC's recent discussion has centered on the pace of easing rather than tightening, making her one of the more hawkish voices among regional Fed presidents. Any decision to raise rates, however, would require majority support on the committee, so a single president's advocacy does not change policy on its own.
The remarks come ahead of a scheduled speech by Warsh at 10 am ET, which markets are watching closely.
Hammack became president of the Federal Reserve Bank of Cleveland in August 2024, after a long career at Goldman Sachs. As a regional Fed president, she participates in the Federal Open Market Committee (FOMC), the body that sets the federal funds rate target range. The Fed's dual mandate, established by Congress, requires the central bank to pursue both maximum employment and price stability, typically interpreted as inflation around 2% over the longer run. Her expectation that inflation ends the year around 3% implies she sees prices rising well above that target, while wage and service-price dynamics often cited by Fed officials tend to move slowly, which is part of why some policymakers argue for acting before inflation becomes entrenched.
Her stated view that financial conditions are not restrictive suggests she believes current borrowing costs and market conditions are not doing enough on their own to bring inflation back to the Fed's target, providing the rationale for her argument that further rate hikes should not be delayed. What to watch next is whether other FOMC participants echo her stance in upcoming speeches and minutes, and how the committee's rate decisions and projections reflect the divide between hawks like Hammack and officials more concerned about the labor market.
Source: Investinglive
