ICYMI – Hawkish Fed’s Hammack says acting now on inflation is really critical
Hammack's Dayton remarks (headlines here earlier) sharpen the hawkish end of the FOMC's internal split, arguing explicitly that current policy is not restrictive and that businesses remain eager to borrow and invest, a dynamic she sees as adding to price pressure rather than easing it. Her framing that the labor market is stable enough to absorb tighter policy removes the usual counterargument for patience, and her explicit rejection of any tension in the dual mandate leaves little room for a middle path in her own thinking. Coming from a sitting FOMC voter who already dissented in July, these comments keep hike odds from falling too far even as broader market pricing has been drifting toward a steady hold.
--- Hammack is done waiting on inflation and wants the Fed to say so with its next rate decision, not its next round of data.
Summary:
- Hammack said acting now is really critical to bring inflation back to the 2% target, warning that delay means more pain for individuals and businesses
- She said Fed policy is not currently restrictive, pointing to businesses that remain eager to borrow and invest in growth
- She described the labor market as reasonably stable, with unemployment between 4.1% and 4.3% over the past year sitting in what she considers the maximum employment zone
- She attributed low headline payroll growth, averaging around 20,000 jobs a month over the past three to 12 months, partly to recent immigration policy shifts, and still views the numbers as consistent with breakeven
- Hammack was one of three dissenters at the Fed's July meeting who favoured raising rates rather than holding at 3.50% to 3.75%
- She cited anecdotes from businesses and households, including rising retail prices and people turning to food banks, as evidence inflation pressure remains widespread
Federal Reserve Bank of Cleveland President Beth Hammack said Thursday that the central bank needs to act now to bring inflation back toward its 2% target, warning that further delay risks deeper pain for households and businesses. Speaking at a Dayton Area Chamber of Commerce event, Hammack said she sees no tension between the Fed's dual mandate of maximum employment and stable prices, arguing that the current moment calls for policy restraint rather than patience.
Central to her case is the view that Fed policy is not currently restrictive. Hammack said businesses she speaks with remain eager to borrow and invest in growth opportunities, a dynamic she welcomes in principle but sees as adding to inflationary pressure if left unchecked. She argued that some degree of policy restraint is needed to bring inflation down from its current level above 3% toward the Fed's 2% objective.
On the labor market, Hammack described conditions as reasonably stable, if less dynamic than in the past. She noted that headline payroll growth has averaged around 20,000 jobs a month over the past three to twelve months, a slowdown she partly attributes to recent shifts in immigration policy. Even accounting for that effect, she said the numbers remain consistent with what she considers a breakeven pace. She pointed to the unemployment rate holding between 4.1% and 4.3% over the past year as evidence the economy remains at maximum employment, removing what would otherwise be the strongest argument for keeping policy on hold.
Hammack was one of three Federal Reserve officials who dissented at last month's meeting, preferring to raise rates rather than hold the federal funds rate in its current 3.50% to 3.75% range. She acknowledged that inflation data has improved over the past two months but said that improvement alone has not convinced her the underlying trend has turned, particularly with the Fed now more than five years removed from last hitting its 2% target. She said the central question is not whether inflation eventually returns to target but how quickly that needs to happen, questioning whether a three to four year glide path back to target would be an acceptable outcome.
To illustrate the pressure she sees building in the real economy, Hammack cited conversations with businesses and households. She described a Cincinnati retailer raising prices preemptively simply because further cost pressure felt inevitable, a father missing his son's travel football games due to high fuel costs, and people with steady jobs turning to food banks to manage household budgets. Those anecdotes, she said, underline why she believes the Fed needs to move faster than a longer term path back to target would otherwise suggest, reinforcing her position as one of the more hawkish voices on the current committee.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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