Fed's Hammack hopes to cool demand and inflation without job market pain
TLT•Cleveland Fed President Beth Hammack said interest rates need to move higher to restrain demand and inflation, while keeping the job market stable. She said she remains open-minded about whether to raise rates at the Fed's October 27-28 meeting and about the pace of any further tightening.
1. Demand and inflation
Hammack said she hopes the Fed can lower inflation without damaging the job market by cooling corporate investment or consumption. Inflation appears lodged between 2.5% and 3.0%, she said, while unemployment is 4.2%.
2. Rate decision remains open
Hammack said rates need to move higher to restrain demand, but she is open-minded about whether to raise them at the October 27-28 meeting after September's hike. She said the timing and extent of further restraint remain open questions; investors currently expect the Fed to hold rates in October.
3. Investment and price pressures
Hammack said spending appears supported by higher-income consumers and wealth gains, while investment is also driving the economy. She is concerned that heavy investment by artificial intelligence data-center firms could contribute to broader expectations of persistent inflation, and said trimming investment demand could help cool prices without layoffs.
