Cleveland Federal Reserve president Beth Hammack said Monday she anticipates more than one interest rate hike will be required to rein in what she calls broadening inflation. “I would say in general, one 25-basis point move probably doesn’t do a whole lot for the economy,”…
mmack told Yahoo Finance in an interview. “So it’s probably some number of movement(s). But I don’t want to prejudge what that number is going to be.” She added, “I don’t know exactly where we will end.” Hammack dissented at the Fed’s July policy meeting when the Federal Open Market Committee held interest rates steady, preferring to have raised rates by a quarter percentage point
She said she does not think interest rates in the range of 3.5% to 3.75% are “meaningfully restricting” the economy right now. “When I’m talking to businesses, I’m not hearing that they’re sensing any restraint from investments in growth based on where interest rates are,” Hammack said. “So to me that says that now is the time to act.” She cautioned that the longer the Fed waits, the longer it misses its inflation goal of 2% and the harder it will be to bring back down. Hammack likened raising rates to pumping the brakes before a stop sign to glide to a stop, rather than slamming on the brakes to halt price growth. “So I think that now is the time for us to start acting, to start bringing more restraint into policy,” she said. The Fed’s preferred inflation gauge — the Personal Consumption Expenditures Index — stood at 3.3% as of June on a core basis, which excludes volatile food and energy prices.
Another measure — the Consumer Price Index on a core basis was 2.6% for June, and economists expect that it ticked down again in July to 2.5% and 0.2%. Investors will get that reading on Wednesday. If core CPI meets expectations, that would mark two straight months of declining inflation. “Nothing would make me feel better than to be wrong, that we need to change the stance of policy to help bring inflation back to target,”…