Written by Dong Jing, Wall Street Sights
Cleveland Fed President Beth Hammack clearly signaled a hawkish stance, stating that a single rate hike alone is unlikely to effectively curb inflation, and achieving the 2% target may require multiple rounds of rate hikes.
In an interview with Yahoo Finance on Monday (August 10), Hammack said, "A single 25-basis-point rate hike may have a negligible impact on the economy," so the number of rate hikes needed "may be more than one." She also said she does not want to predict the exact number of rate hikes in the end. Hammack also noted that the current level of interest rates has not formed a "materially restrictive" effect on the economy, and she does not believe inflation will fall back to the target level on its own. Hammack is a voting member of the FOMC this year.
The above remarks further strengthened the market's hawkish expectations for the Fed's policy path. Hammack was one of three dissenting officials at last month's Fed meeting, where she and the other two officials voted for a rate hike, opposing the decision to hold rates steady.
Behind the Dissenting Votes: Hammack's Hawkish Stance
Hammack's dissenting vote at last month's Fed policy meeting has clearly outlined her policy leanings. After the meeting, she warned in a statement that the longer high inflation persists, the harder it will be to bring it back to the target level.
This interview is her first detailed elaboration of her monetary policy stance since her dissenting vote. Her remarks indicate that her concerns about the current policy stance have not dissipated with the decision to hold rates steady.
Hammack explicitly stated that the current level of interest rates has not yet formed a "materially restrictive" effect on economic activity. This judgment implies that, in her view, the current degree of monetary policy tightening is still insufficient to effectively curb inflationary pressures.
She also emphasized that inflation will not automatically return to the 2% target, further supporting her logic for advocating more aggressive rate hikes - if market forces alone cannot accomplish the task of cooling inflation, then policy tools must play a greater role.
When asked about the magnitude of rate hikes, Hammack gave a directional rather than definitive statement. She said the number of rate hikes needed "may be more than one," but explicitly stated that she "does not want to predict the specific number."
