Cleveland Fed President: “Rates Should Be Raised”…Questions Persist Over Sustainability of Disinflation

On August 10, "Current Rates Not Restrictive"

July PPI Unchanged from Previous Month... Slower Than Expected

Federal Reserve Bank of Cleveland President Beth Hammack recently reaffirmed her position that interest rates should be raised, stating it is difficult to be confident that the recent slowdown in inflation will persist. Following Boston Fed President Susan Collins' comments the previous day, in which she left open the possibility of further tightening, voices within the Federal Reserve (Fed) emphasizing the need for a rate hike are growing.

Federal Reserve (Fed). Reuters Yonhap News

According to Bloomberg News on August 13 (local time), President Hammack said at a Dayton Regional Chamber of Commerce event held in Kettering, Ohio, "It is encouraging and positive to see the numbers coming down," but added, "I am not confident this trend will continue."

She specifically questioned whether the inflation rate would remain low enough to reach the Fed's 2% target. Regarding monetary policy, she stressed the necessity for a rate hike by saying, "I believe we need to act now."

Last month, President Hammack voted against keeping the federal funds rate unchanged at the Federal Open Market Committee (FOMC), advocating for a 0.25 percentage point increase. In an interview with Yahoo Finance on August 10, she also stated that the current interest rate level does not "meaningfully constrain" the economy, and that several rate hikes may be needed to bring inflation back to the target level. However, she drew a line, saying she does not want to prejudge what the final rate level should be.

Her remarks come as recent U.S. price data have been better than expected. The core Consumer Price Index (CPI) for July, announced the previous day, rose just 0.2% from the previous month, leading the market to evaluate that the pressure on the Fed to raise interest rates further has eased somewhat. On this day, the Producer Price Index (PPI) for July remained unchanged at 0.0% month-on-month, and slowed significantly year-on-year to 4.7%, down from 5.5% in June.

However, President Hammack holds the view that it is premature to conclude that inflation will stably return to the Fed's target level based on the recent slowdown in prices alone. As a result, according to Bloomberg, differing opinions within the Fed are likely to clash ahead of next month's FOMC meeting: some believe it is necessary to monitor the disinflation trend a bit longer, while others argue for preemptive additional tightening.

This content was produced with the assistance of AI translation services.