Hammack Warns More Rate Hikes Needed to Fight Inflation — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Beth Hammack, Cleveland Fed President and voting FOMC member, said at the National Association of Business Economics annual gathering that a restrictive monetary policy stance is appropriate to ensure a timely return to the Fed's 2% inflation target.
- Hammack advocated making 'smaller adjustments... relatively quickly' rather than waiting and 'risking a larger course correction' in monetary policy.
- Federal Reserve officials signaled in September meeting minutes they could vote to raise rates again, without giving a clear indication of timing for such a decision.
- Traders priced a more than 78% likelihood the Fed keeps rates unchanged at the upcoming policy meeting, but nearly 88% odds of a hike at the December meeting, per CME's FedWatch tool.
- The PCE price index came in at 3.4% YoY in August, with core PCE — the Fed's preferred measure — at 3% YoY, both well above the central bank's 2% goal.
- Hammack warned that 'persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy,' noting long-run inflation expectations have stayed 'remarkably well anchored' despite five-plus years of above-target inflation.
Why it matters: With core PCE at 3% YoY and headline PCE at 3.4% YoY, the Fed faces an inflation problem that hasn't meaningfully cooled, and Hammack's preference for incremental moves over patience reframes the December hike — which traders already price at 88% odds — from a possible move to the base case for anyone tracking FOMC voters' rhetoric.
Ask SkimNews
