By Michael S.
Derby and Dan Burns July 31 Two of the three Federal Reserve officials who dissented at this week’s policy meeting in favor of an interest rate hike said on Friday that action is needed now to bring inflation back down to the U.S. central bank’s 2% target. “Inflation has remained stubbornly above 2% for more than five years, and I am not confident it will return to our objective on its own,” Cleveland Fed President Beth Hammack said in a statement released by her regional bank. “A higher federal funds rate would help restrain economic activity and reduce inflationary pressures” and the economy can deal with higher interest rates given the stability of the job market, Hammack said. “I preferred to move at our recent meeting because I did not see the current policy stance as appropriately restrictive.” In a separate statement, Minneapolis Fed President Neel Kashkari also expressed concern about inflation and said the Fed should have raised rates on Wednesday as the first in a series of hikes. “To manage against the risk that high inflation could become entrenched, I would rather tighten policy incrementally as we gather more data on the path of inflation and employment,” Kashkari wrote. “If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary,” Kashkari said
If inflation were to cool, the Fed could slow or pause the rate hikes “without unnecessary impact on the real economy,” he added. Hammack has hawkishly dissented in three of eight policy meeting votes while Kashkari has dissented six times in 30 votes, according to Wrightson ICAP. Dallas Fed President Lorie Logan was the third policymaker to support raising the central bank’s benchmark interest rate by a quarter percentage point from its current 3.50%-3.75% range this week.
The vote in favor of holding rates steady was 9-3. STICKY INFLATION The outcome of this…