A nearly six-year stretch of inflation above the Federal Reserve’s 2% goal is shaping Cleveland Fed President Beth Hammack’s support for measured adjustments, even as she expects monetary policy to become restrictive.
At the SNB and Its Watchers Conference in Zurich on Thursday, Nov. 5, Hammack said smaller changes made more frequently could be preferable when conditions permit. She argued that this approach could ease disruption for households, businesses and financial markets. She also said it could reduce the chance that policymakers fall behind price pressures and allow an inflationary mindset to take hold.
Hammack did not give a date or size for future policy adjustments in her prepared remarks. “I expect that monetary policy will need to move to a restrictive stance,” she said. She added that the speech reflected her own views, not necessarily those of the Federal Reserve System or her colleagues on the Federal Open Market Committee (FOMC).
The Bureau of Economic Analysis (BEA) reported that the personal consumption expenditures (PCE) price index rose 3.6% from a year earlier in September. The core measure, which excludes food and energy, increased 3.1%. Hammack described inflation pressures as broad-based, with contributions from both supply and demand, and said inflation had exceeded the Fed’s goal for nearly six years.
The FOMC voted 10-2 on Oct. 28 to keep the federal funds target range at 3.75%-4.00%. Hammack and Fed Governor Lisa Cook preferred a 0.25-percentage-point increase. Hammack had previously said policy would need to become restrictive, as detailed in EconoTimes’ earlier report on her policy outlook.
The BEA’s next Personal Income and Outlays report, covering October and including the PCE index, is scheduled for Nov. 25 at 8:30 a.m. EST. The FOMC’s next meeting is set for Dec. 8-9.
