Fed’s Beth Hammack Urges Rate Hikes, Warning That Waiting Will Create Pain

Cleveland Federal Reserve President Beth Hammack is pressing for higher interest rates, warning that inflation remains too high and delaying action could make the eventual adjustment harder for households and businesses.

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Hammack Says Inflation Could Stay Near 3%

Hammack said she expects inflation to finish the year at about 3%, well above the Federal Reserve’s 2% target. She also expects only limited progress next year, with inflation potentially falling to the mid 2% range at best.

“I believe now is the time to act,” Hammack said, while adding that she did not want to prejudge future policy decisions. She argued that current financial conditions do not appear restrictive enough to bring inflation back toward the Fed’s goal.

Hammack said prolonged inflation creates a risk that higher prices become more firmly built into public expectations. “The longer inflation stays above our objective, the harder it will be for us to bring it back down,” she said, adding that households and businesses could face more pain if price pressures remain elevated.

Recent inflation has been linked to several factors, including energy costs, tariffs and stronger demand tied to artificial intelligence investment. Fed officials often avoid reacting strongly to short-term supply shocks, but some policymakers remain concerned that repeated price increases could become harder to reverse.

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July Fed Meeting Exposed Policy Split

Beth Hammack voted against the Fed’s decision to keep its benchmark interest rate unchanged at the July 29 meeting. Neel Kashkari and Lorie Logan also preferred a quarter-point rate increase.

The Fed kept its target range at 3.50% to 3.75%, while policymakers continued to debate whether inflation or economic weakness presents the greater policy risk. Hammack has remained among the officials calling for tighter policy.

She also questioned whether current borrowing and market conditions are limiting economic activity enough. “I don’t see any restriction in policy when I look at financial conditions and when I talk to market participants,” Hammack said.

Fed Credibility and Warsh Speech Draw Attention

Hammack said the Fed must maintain credibility by meeting both parts of its mandate, which cover stable prices and maximum employment. She also said financial markets can support the central bank’s work but cannot replace monetary policy decisions.

Attention is now turning to Fed Chairman Kevin Warsh, who is scheduled to speak Friday at the central bank’s annual Jackson Hole gathering. Investors are looking for clearer guidance on how the Fed could respond if inflation remains above target.

Warsh previously said central bankers become “more inclined” to raise rates when underlying inflation moves higher, although he has not clearly stated whether he believes those pressures are currently worsening.