Fed's Hammack Backs Gradual Hikes as Inflation Moves Wrong Way

Cleveland Federal Reserve President Beth Hammack said on Thursday the US central bank should keep raising interest rates in small steps to move policy into restrictive territory, Reuters reported, though she sees no need for more aggressive moves to fight inflation that remains high and is broadening.

Small, frequent increases

Speaking at an event at Ohio State University, Hammack, a voting member of the Federal Open Market Committee, said recent inflation data was “moving in the wrong direction.” She warned that without further tightening, an inflationary mindset could start to take hold, according to Reuters.

She said she prefers smaller, more frequent rate rises over sharper moves. Hammack added that she does not think the Fed is behind the curve today, but said a faster pace might need to be considered if that changed. She stressed that her views were not promises or commitments and that she enters every meeting with an open mind.

Hammack was an early supporter of raising rates. Reuters said the Fed lifted its benchmark rate by 25 basis points to a range of 3.75% to 4.00% at its September meeting, after holding rates in July, and held again in October. Hammack dissented at both the July and October meetings.

Officials weigh size of December move

Her comments come as policymakers debate how big the next step should be. Fed Governor Christopher Waller earlier this week appeared to favour a half-point increase after October consumer inflation data came in above expectations, Reuters said. Analysis site ActionForex said Hammack’s stance “could temper expectations for a larger December move.”

Other officials have also weighed in. TheStreet reported that Chicago Fed’s Austan Goolsbee, speaking at Yahoo Finance’s Invest conference on Thursday, said inflation in services and healthcare appeared to be heading the wrong way, but did not signal the size of a December move. Philadelphia Fed’s Anna Paulson said further gradual tightening seemed appropriate for now, the outlet said.

Vice Chair for Supervision Michelle Bowman said in a Nov 10 speech that there was still work to do to bring inflation closer to 2%, and that October core PCE inflation likely rose further to 3.3%, according to TheStreet.

Jobless claims tick higher

Labour data released on Thursday showed initial jobless claims rose by 9,000 to 200,000 in the week ended Nov 7, above an estimate of 195,000, TheStreet reported, citing the Labor Department. It was the largest weekly increase since August. The four-week average fell to 195,250, the lowest since October 1969, while continuing claims eased to 1.697 million.