Finance1 min read

Fed's Beth Hammack favors gradual rate-hike path to lower inflation

By · Published by Everything Blog

In short

Hammack pushed to advance monetary policy into restrictive territory through measured interest rate increases to prevent policy from falling behind inflation. She recently broke ranks alongside Fed Governor Lisa Cook to dissent against holding the benchmark interest rate between 3.75% and 4.00%. Hammack previously cast another dissenting vote in late July over the decision to keep rates steady. Beyond domestic policy, she downplayed threats to the U.S. dollar, citing volatile cryptocurrency prices as an obstacle to rivaling the currency.

Key points

  • Smaller and more frequent interest rate increases are preferred to minimize disruptions f…: Smaller and more frequent interest rate increases are preferred to minimize disruptions for households, businesses, and financial markets.
  • Beth Hammack warned that existing monetary policy fails to provide enough restraint to re…: Beth Hammack warned that existing monetary policy fails to provide enough restraint to return inflation to the 2% goal.
  • High price volatility prevents cryptocurrencies from functioning as a reliable store of v…: High price volatility prevents cryptocurrencies from functioning as a reliable store of value or challenging the U.S. dollar.

Sources checked by our analysis pipeline: 1

"I expect that monetary policy will need to move to a restrictive stance to bring inflation back to 2% in a timely manner," Hammack said in the text of a speech prepared for delivery before an event in Zurich.

While Hammack did not say when she would like the Fed to next raise rates, she noted that she prefers "getting to that stance through more frequent smaller adjustments when possible, something which would be less disruptive to households, businesses, and financial markets."

Gradual increases "would also reduce the risk of having policy fall behind where it needs to be and an inflationary mindset take hold," Hammack said.

The Fed last week left its benchmark interest rate within the 3.75%-4.00% range, even as policymakers acknowledged that inflation was too high. The Fed raised rates in September and financial markets broadly expect another increase in December.

Hammack, along with Fed Governor Lisa Cook, dissented in favor of a rate hike last week. Hammack, who also dissented in late July when the Fed left rates unchanged, has argued that monetary policy and the…

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