Cleveland Fed President Beth Hammack said Thursday that recent inflation numbers show the central bank is still too far from its goal and reiterated her call for rate hikes.
A report released Wednesday showed inflation at an annualized rate of about 3%, central bank policymakers said. Hammack said the Fed should tighten monetary policy even though monthly price increases have slowed in the past few months.
“I don’t want to prejudge anything, but I believe now is the time to act,” he said in a live interview on CNBC at the Fed’s annual symposium in Jackson Hole, Wyoming. “I think we’ve been in an inflation situation for more than five years. Inflation is well above target. When I look at monetary conditions and when I talk to market participants, I don’t see any constraints on policy.”
This statement is consistent with other statements Hammack has made recently.
Hammack was one of three voting members this year to vote against the central bank’s decision to keep interest rates in the 3.5% to 3.75% range at the July meeting of the Federal Open Market Committee. The group wanted a one-quarter percentage point increase instead.
Hammack said he still believes the Fed needs to take action to combat the inflation that is weighing on household budgets.
“The longer inflation remains above target, the harder it will be to bring it down and the more pain individuals and businesses will experience,” he said. “For me, the real problem with not hitting the inflation target for so long is the risk that inflationary tendencies will start to creep into the population.”
Much of this year’s rise in inflation is due to the impact of the Iran war, tariffs and demand related to artificial intelligence. While policymakers typically focus on supply shocks and other factors that are generally seen as temporary, some Fed officials are concerned that the effects could take root in the economy.
Hammack said she recently met with workers in Erie, Pennsylvania, and they said they were “all feeling hopeless. They’re working every day, they’re going to work, they’re getting good jobs, and they still feel like they can’t make ends meet. They can’t afford to go out for ice cream with their kids on the weekends.”
However, market prices indicate the Fed will keep rates on hold at both its September and October meetings and wait until December to raise rates next.
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