Two senior Federal Reserve officials staked out opposite positions on interest rates Thursday. Cleveland Fed President Beth Hammack called for an immediate increase, while Richmond Fed President Thomas Barkin said another hike may not be needed if current price pressures fade.
Hammack pushes for immediate tightening
Speaking Thursday at the Dayton Area Chamber of Commerce in Dayton, Ohio, Cleveland Fed President Beth Hammack said the Fed should raise rates now, arguing current policy isn't providing enough restraint to bring inflation back to 2% quickly enough. She pointed to businesses still eager to borrow and invest, warning that excessive growth could add to price pressures.
Hammack acknowledged that inflation data have improved over the past two months, but said that isn't enough to convince her the disinflation will persist. She also challenged the idea that the Fed can tolerate a very gradual return to target, asking whether a three- or four-year timeline back to 2% would be acceptable. Hammack said flatly: "I think that we need to act now."
She cited businesses pre-emptively raising prices in anticipation of future cost pressures, as well as household strain from high gasoline and living costs, as evidence that prolonged inflation carries real consequences. That leaves her firmly on the hawkish side of the debate, after she dissented at the July meeting in favor of a hike.
Barkin: another hike may not be needed
By contrast, Richmond Fed President Thomas Barkin said Thursday it remains unclear whether the Fed will need to raise rates again to bring inflation back to 2%. In remarks prepared for delivery to the Greenville Chamber of Commerce, he said much of today's elevated inflation has come from shocks — tariffs, higher oil prices and AI-related demand for labor and supplies — that should pass.
Barkin said that if those shocks ease, current interest rates may already be restrictive enough to bring inflation down without another increase. But he also warned inflation could prove more embedded if supply-chain problems persist or AI investment remains strong enough to keep raising costs, and flagged the risk of an upward shift in the price expectations of firms and consumers after inflation stayed above target since 2021.
Sources: ActionForex, ActionForex
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