Higher rates could be needed to avoid 'inflationary mindset' taking hold, says Fed's Hammack — SkimNews
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- Beth Hammack, Cleveland Fed president and voting FOMC member, said tighter monetary policy may be needed and called for smaller, faster rate adjustments over waiting for a larger course correction.
- Hammack said a "restrictive" policy stance is appropriate to ensure a timely return to the Fed's 2% inflation target, adding that the "breadth" of inflationary pressures means getting to 2% will take "some time."
- Federal Reserve officials voted last month to raise rates for the first time in three years, with September meeting minutes indicating another hike is possible without a clear timing signal.
- CME FedWatch data shows traders pricing a 78% chance the Fed holds rates steady at its October meeting, but an 88% chance of a hike at the December meeting.
- August PCE data showed the price index at 3.4% year over year, with the core reading — the Fed's preferred measure — at 3%.
- Hammack warned that long-run inflation expectations have stayed "remarkably well anchored" despite five years of above-target inflation, but said she is "not taking that for granted."
Why it matters: With PCE inflation still running 140 basis points above the 2% target and core at 3%, Hammack's call for incremental hikes aligns with the 88% market-implied odds of a December move — a Fed that continues tightening rather than pausing could keep borrowing costs elevated for consumers and businesses heading into 2025.
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