Fed's Hammack: Further policy tightening needed to lower inflation

BlockBeats news, October 13 — Cleveland Fed President Hammack said the Federal Reserve needs to bring monetary policy to a restrictive level to push inflation back down to its 2% target. She said the current policy stance means it could take longer than acceptable for inflation to fall, so "more tightening" is needed.

Hammack said rate hikes may still be needed in the future, but the timing has not yet been determined, and she favors a "smaller, more frequent" approach to adjustments to help businesses and households plan ahead. Hammack said corporate input costs are rising, and more companies are beginning to pass costs on to consumers. If prices are no longer constrained by demand, inflation could rise further or remain elevated.

She pointed out that the biggest inflation risk is that individuals and businesses develop an "inflation mindset" and gradually accept higher inflation levels, which would make it harder for the Fed to bring inflation back to target. Some signs of this have already appeared. Turning to the rise in U.S. Treasury yields, Hammack said it is mainly driven by factors including economic growth expectations, market repricing of Fed policy, fiscal pressures, and heavy bond issuance. She said the data center investment boom is driving growth, but the current financial conditions still need to tighten further to help inflation decline. Hammack also stressed that Fed independence is "always crucial." (Jinshi)