Key facts
- Cleveland Fed President Beth Hammack is concerned that persistent high inflation risks conditioning the American public to accept elevated prices as the norm.
- Hammack stated that monetary policy is not yet at the restrictive stance needed to bring inflation back to the Fed's 2% target.
- She noted that robust demand tied to the solid performance of the economy and the stability of the job market are contributing to high inflation.
- Hammack believes inflation expectations are reasonably well-anchored, and rising bond yields reflect a solid economic outlook.
- She indicated that real interest rates have moved up more than inflation expectations.
Federal Reserve Bank of Cleveland President Beth Hammack said on Friday that the recent jump in government bond yields is not primarily due to renewed inflation fears, but rather a reflection of a solid economic outlook and increased competition for investor cash. She explained that real interest rates have risen more significantly than inflation expectations, which she believes remain reasonably well-anchored. Hammack expressed concern that persistent inflation risks conditioning the American public to accept elevated prices as the norm, stating that the central bank must ensure policy remains at a restrictive stance to bring inflation back to its 2% target. She noted that high inflation is driven by robust demand tied to the strong economy and stable job market, not just external shocks. While Hammack did not specify future rate actions, she indicated that monetary policy is not yet restraining investment in the economy, as interest rates are not a major factor for most businesses outside of housing. However, she cautioned that if current conditions are creating more inflationary pressures, policy must address it.