She added that the Fed shouldn’t fade into the background regarding its mandate to ensure stable prices. “Markets are a complement for the Fed,” Hammack told Yahoo Finance. “They’re not a substitute. We have to stand behind our words with our actions when appropriate.”
Late last month, Fed officials voted 9-3 to keep interest rates unchanged in the range of 3.5% to 3.75% for the fifth time in a row. The three dissenting voices came from regional bank presidents who favored a quarter-point rate increase to address energy supply shocks from the Iran War that pushed up gasoline prices, along with the cost of plenty of other products that rely on diesel for transportation, such as groceries. Hammock was among them.
“Now is the time to act,” she said on Tuesday. At a recent City Club of Cleveland event, she said, “Inflation does not merely raise costs. It raises uncertainty.”
The Fed’s next moves on inflation
Hammack said after the Fed’s July meeting that she had heard rising anxiety among consumers and businesses about the recent spike in prices. For many workers, inflation is swallowing most of their wage gains, while businesses grapple with higher shipping costs and inflation-weary customers.
“What I have heard from across the Fourth Federal Reserve District reinforces this view: Businesses describe pricing pressures as broadening rather than fading, and consumers are expressing despair over persistently higher prices,” Hammack said in a LinkedIn post.
Fed officials won’t reconvene again until mid-September, but a pair of inflation readings will set the stage for its next moves on rates.
The July consumer price index (CPI) will be released on Wednesday, and most analysts believe it will show a 2.5% year-over-year increase after stripping out volatile energy and food prices. The Fed’s preferred inflation gauge tracking personal consumption expenditures (PCE) will be published on Aug. 26. If the reports display a round of higher-than-anticipated price increases, pressure will mount on Fed Chair Kevin Warsh to push through interest rate hikes.
The case to hold interest rates steady for now
Not everyone’s on board to increase interest rates right away. Fed Governor Lisa Cook, another FOMC voting member, said in an Aug. 5 speech that she believed price pressures would fade over time and supported sitting still on rates.
She argued tariff-fueled inflation on products was mostly in the rearview mirror at this stage and cited analyst forecasts that oil prices would come down by year’s end. She also expected AI supply chains to adjust and ward off the price increases on computer chips that are in extremely high demand from tech companies.
“For these three reasons, I felt it was appropriate not to change rates while we see how these factors evolve,” she said at an economic luncheon in Alaska. “If I do not see signs of continued disinflation soon, I am prepared to act.”
Joseph Zeballos-Roig is a policy and politics journalist based in Washington D.C with a focus on economics. He is experienced in connecting the significance of events in the capital to the lives of everyday Americans whether its taxes, tariffs, interest rates or federal programs.
