By Michael S. Derby
NEW YORK, Nov 12 (Reuters) – Cleveland Federal Reserve President Beth Hammack said on Thursday she does not believe that the US central bank needs to shift to more aggressive interest rate rises to combat still-high and broadening inflation.
“My expectations are that we need to move to a restrictive stance of policy to help bring inflation back down to that 2% objective, which is critically important,” Hammack said during an event at Ohio State University. “If we don’t, I worry that an inflationary mindset could start taking hold,” she said.
“My view is that if we go steadily in smaller increments, more frequent, smaller rises, it’s easier for businesses and households to manage around that,” Hammack said. A more gradual pace of action is “less disruptive to the overall economy than moving in sharper, more aggressive movements,” she said.
But even with her concerns about inflationary pressures, which Hammack said are “moving in the wrong direction” based on recent data, she added that it does not appear that this is the time for the Fed to hike rates at a more aggressive pace.
“If we get behind the curve, and I don’t think we’re behind the curve today, but if we get behind the curve, then that might be something that we need to consider,” said Hammack, who is a voting member of the Fed’s policy-setting committee.
Hammack was an early and steadfast supporter of raising rates to ease price pressures. The Fed raised its benchmark interest rate by a quarter of a percentage point to the 3.75%-4.00% range at its September meeting, but left rates steady in July and October, leading Hammack to dissent at those two meetings.
The Fed is widely expected to raise rates by a quarter of a percentage point at its December 8-9 meeting. Earlier this week, Fed Governor Christopher Waller, an influential voice on monetary policy issues, seemed to favor a half-percentage-point hike next month, given that consumer inflation data for October came in above expectations.
In contrast to that hawkishness, other Fed officials have signaled support for gradual rate hikes for the same reasons as Hammack.
On Thursday, Hammack offered a note of caution on her interest-rate views. “Those are not promises. Those are not commitments. They’re not forward guidance, which is a hot-button topic … they are a conditional set of expectations of where I think the economy can go,” she said.
“I walk into every meeting with an open mind” and ready to listen to what other Fed officials have to say, Hammack said.
(Reporting by Michael S. Derby; Editing by Paul Simao)
