- Cleveland Fed President Beth Hammack stated that 'now is the time to act' regarding interest rates, emphasizing that inflation has been above the Fed's target for more than five years.
- Kansas City Fed President Jeffrey Schmid described inflation as 'stubborn' and 'sticky', questioning whether the current federal funds rate is restrictive enough to cool the economy.
- Chicago Fed President Austan Goolsbee identified inflation as his biggest near-term concern, highlighting the impact of rising energy costs and tariff uncertainty.
- Recent US data indicated that the PCE price index rose 3.7% in the year to July, remaining unchanged from June but down from 4.1% in May.
- Boston Fed President Susan Collins described the latest inflation data as 'mixed' but noted a trend towards gradual disinflation.
- Markets are anticipating Fed Chair Kevin Warsh's speech on Friday for insights into the future interest rate path.
Cleveland Fed President Beth Hammack emphasized the urgency for rate hikes, stating, "now is the time to act", as inflation has exceeded the Fed's 2% target for over five years. She noted that inflation is expected to stabilize around 3% by 2026, with limited progress anticipated next year.1
At the Jackson Hole symposium, Kansas City Fed President Jeffrey Schmid echoed these sentiments, labeling inflation as "stubborn" and "sticky". He questioned whether the current federal funds rate of 3.50%-3.75% is sufficient to cool the economy, suggesting that more information is needed to understand the demand side driving inflation.2
Hammack's caution stems from increasing reports of inflationary mindsets among businesses, which could embed higher prices in the economy. She stated, "I don't think we're there yet, but that's what I want to make sure we avoid".
Chicago Fed President Austan Goolsbee also raised alarms about inflation, particularly due to rising energy costs linked to geopolitical tensions and tariff uncertainties. He warned, "Everybody should be on edge" regarding affordability and inflation's potential resurgence.
The latest data shows the Personal Consumption Expenditures (PCE) price index rose 3.7% year-over-year in July, unchanged from June, indicating persistent price pressures that could necessitate further rate hikes.
As the Fed prepares for its next meeting, the consensus among officials is clear: inflation remains a significant concern, and the possibility of prolonged high interest rates looms large.
“Hammack expects US inflation to end 2026 around 3% and sees limited progress next year, possibly reaching only mid-2% range. She also noted growing concerns from businesses about an 'inflationary mindset' embedding in the economy, which she wants to avoid.”
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