Beth Hammack: more than one interest-rate hike will be needed to bring down inflation

Cleveland Federal Reserve Bank President Beth Hammack said on Monday that, in her view, more than one interest-rate increase will be needed to curb what she calls the “broadening of inflation.” “Overall, I would say that one 25-basis-point hike probably wouldn’t have much of an effect on the economy,” Hammack said in an interview with Yahoo Finance. “So it will likely take some number of additional hikes. But I don’t want to predict what that number will be.”

At the Federal Reserve’s July meeting, Hammack dissented from the Federal Open Market Committee’s decision to leave interest rates unchanged, instead preferring a quarter-point rate increase.

She said she does not think interest rates in the 3.5% to 3.75% range are currently significantly restraining the economy. “When I talk to business leaders, I don’t hear them saying they’re holding back on investment because of the level of interest rates,” Hammack said. “So in my view, now is the time to act.” She warned that the longer the Fed waits, the longer it will take to reach its 2% inflation goal—and the harder it will be to bring inflation down.

Hammack noted that the July jobs report, which showed an unexpected decline of 23,000 jobs over the month, does not distract her from the inflation problem. She noted that over the past 12 months, job gains have averaged 20,000–25,000, and said the 4.1% unemployment rate is roughly consistent with her estimate of full employment. “I still don’t see problems in the labor market,” she said.