Cleveland Federal Reserve Bank President Beth Hammack on Thursday reiterated her view that the U.S. central bank should raise rates immediately to bring down too-high inflation and restrain business growth and investment.
"When I'm talking to businesses, I hear that businesses are excited to raise funds, they're excited to borrow so they can continue to invest. They see the growth opportunities, which is great; I want them to continue to see growth opportunities, but if we have too much of that growth.... it could mean that that's putting additional pressure on price increases and that puts more of that inflationary pressure out there," Hammack said at the Dayton Area Chamber of Commerce in Dayton, Ohio. "We need to make sure that we've got some amount of restraint coming from policy so that we can get inflation from this above-3% number back down to that 2% objective."
Hammack was one of three Fed officials who dissented at the Fed's meeting last month against the majority who decided to keep short-term borrowing costs in their 3.50%-3.75% range. On Thursday she said that while the inflation data has improved over the past two months, that's not enough to convince her the tide has turned, particularly when it has been more than five years since the Fed has hit its 2% inflation target.
"I don't have confidence that we're going to continue to see that or that we're going to see them low enough that it's going to bring us back down to that 2%," she said. "The job is to make sure that we are making progress towards that 2%. And then the question is how quickly do we need to deliver on that 2% objective and maybe we'd get there, but if it takes us another three or four years to get there, is that OK?"
One retailer in Cincinnati told her that they are raising prices "because they don't know where the next price pressure is going to come from, but they know it's coming from somewhere," she said. She said she met a father who had to miss his son's travel football games because of the high cost of gas. People with decent jobs are turning to food banks to manage their budgets, she said.
"I think that we need to act now because I think we need to bring inflation back down to that 2% objective faster than what a longer-term glide path would say with interest rates at this level," she said.
