Fed's Hammack: Rates may need to rise if inflation persists

Key facts

• Cleveland Fed President Beth Hammack suggested interest rates may need to rise if inflation persists.
• Hammack is more concerned about persistently high inflation than risks to employment.
• She warned that delaying action could necessitate larger, more costly policy adjustments.
• Hammack believes current trends might warrant decisive action to ensure inflation expectations retreat to the Fed's 2% target.
• She dissented at the April meeting against language suggesting the Fed's next move would be a rate cut.

Cleveland Federal Reserve President Beth Hammack suggested that the U.S. central bank might need to increase interest rates if inflation continues to rise. She expressed greater concern about the risks of persistently high inflation compared to risks to employment, warning that delaying action could necessitate larger, more costly policy adjustments. Hammack emphasized the importance of inflation expectations and stated that current trends might soon warrant decisive action to ensure price pressures return to the Fed's 2% target. However, she also noted that keeping rates steady is currently reasonable given economic uncertainties, but future data could change this outlook. Hammack had previously dissented against language suggesting a rate cut at the April FOMC meeting.