Fed's Hammack backs restrictive policy, says better if it comes 'relatively quickly'
TLT•Cleveland Fed President Beth Hammack said the central bank should move relatively quickly to a restrictive policy stance, putting underlying inflation in the mid-to-high 2% range. Investors expect the Fed to hold its policy rate at 3.75%-4.00% at its October 27-28 meeting.
1. Hammack favors quicker moves
Hammack said a restrictive monetary policy stance is appropriate to return inflation to 2%, and that smaller adjustments made relatively quickly may be preferable to waiting and risking a larger correction. She said firms in her district plan price increases that outpace their input-cost growth, and her staff estimates underlying inflation is in the mid-to-high 2% range.
2. Inflation pressures broaden
Hammack said inflation pressures are broad-based and that AI-related demand is raising prices for computer, electronic and high-tech components, adding costs for data centers and projects in aviation, electricity production and construction. She said her baseline forecast is that inflation will take some time to return to 2%, even with appropriate monetary policy.
3. Rate decision expected unchanged
Investors expect the Fed to leave its policy rate in the 3.75%-4.00% range at its October 27-28 meeting. Hammack, a voting member of the policy committee, dissented in favor of raising rates in July; she said policymakers should explain how they are likely to respond to economic data.
