Key facts
- Cleveland Federal Reserve President Beth Hammack believes it is time to raise interest rates to combat inflation.
- She dissented from the Fed's recent decision to hold rates steady, voting for a 25 basis point hike.
- Hammack suggested that multiple rate increases may be necessary to prevent inflation from becoming entrenched.
- She stated that businesses are not currently sensing investment restraint due to current interest rate levels.
- Hammack expressed concern that delaying action will make it more difficult to return inflation to the Fed's 2% target.
- She noted that the July jobs report showed a loss of 23,000 jobs but still views the labor market as strong.
Cleveland Federal Reserve President Beth Hammack stated that the time has come for the central bank to implement interest rate hikes to combat persistent inflation. Hammack was among the dissenting voices at the Fed's recent meeting, voting in favor of a 25 basis point increase, arguing that a single hike is unlikely to significantly impact the economy.
In an interview with Yahoo Finance, Hammack expressed her view that multiple rate increases may be necessary to prevent inflation from becoming more entrenched. She indicated that current interest rates are not meaningfully restricting economic activity, as businesses are not reporting significant restraint on investment due to borrowing costs. Hammack emphasized that delaying action will make it more challenging to bring inflation back to the Federal Reserve's 2% target.
Despite the July jobs report showing an unexpected loss of 23,000 jobs, Hammack maintained that the labor market remains strong, with the unemployment rate near her estimate of full employment. She likened the approach to raising rates gradually to applying the brakes on a car to ensure a smooth stop, rather than a sudden, drastic measure.