Fed's Hammack says 'now is the time to act' on raising interest rates

Cleveland Federal Reserve President Beth Hammack on Thursday repeated her call for higher interest rates, saying recent inflation data show the central bank is still too far from its goal.

A report released Wednesday showed inflation running around 3% on an annualized basis, the central bank policymaker said. Even though the monthly rates of price increases have slowed over the past few months, Hammack said the Fed should tighten monetary policy.

"I don't want to prejudge anything. But I believe now is the time to act," she said in a live interview from the Fed's annual symposium in Jackson Hole, Wyo. "I believe that we've been in an inflationary situation for more than five years. It's been running well above our target. I don't see any restriction in policy when I look at financial conditions and when I talk to market participants."

The remarks are in line with others Hammack has made recently.

At the July meeting of the Federal Open Market Committee, of which Hammack is a voting member this year, she was one of three dissenters on the decision to hold the central bank's policy rate in a range between 3.5%-3.75%. The group instead preferred a quarter percentage point hike.

Hammack said she still thinks the Fed needs to take action against inflation that is straining household budgets.

"The longer inflation stays above our objective, the harder it will be for us to bring it back down, and the more pain that individuals and businesses are going to be experiencing," she said. "To me, the real problem with us missing on our inflation objective for so long is the risk that an inflationary mindset starts to set in with the public."

Much of this year's inflation increase has been traced to the impact from the Iran war, tariffs and demand related to artificial intelligence. While policymakers generally look through supply shocks and other factors generally regarded as temporary, some Fed officials worry that the effects could become embedded in the economy.

Hammack said she recently met with workers in Erie, Pa., who "were all saying that they're feeling a sense of despair. They're working every day, coming in, they've got good jobs, and yet they still feel like they can't make ends meet. They can't go and afford an ice cream cone on the weekend with their kids."

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