Cleveland Fed's Hammack Calls for More Rate Hikes, Warns Current Policy Not Restrictive Enough

Cleveland Federal Reserve President Beth Hammack said Monday that U.S. interest rates need to rise further, arguing that current monetary policy is not sufficiently restrictive to return inflation to the Fed's 2% target. Speaking in an interview with Barron's, Hammack said the pace of disinflation has been too slow and warned that prolonged elevated inflation risks becoming embedded in consumer and business expectations, which would make restoring price stability significantly harder.

Hammack said businesses are already passing higher input costs on to customers, a sign she views as evidence that more tightening is needed in the economy. She favors a path of smaller, more frequent rate increases rather than larger moves, though she said she remains open on the timing of the next hike. Notably, she pushed back on the idea that rising bond yields have done enough of the Fed's work, saying current policy still falls short of genuinely restrictive territory.