Cleveland Fed chief urges extra, gradual rate hikes to hit 2% inflation target

Cleveland Federal Reserve President Beth Hammack said the central bank must raise interest rates further to bring inflation back to the 2% goal. She argued that the current policy stance is not restrictive enough after the last Fed meeting left rates unchanged. Hammack suggested the hikes be smaller in size but occur more often, aiming to limit shock to households and financial markets. She warned that a single large increase could strain borrowers and create volatility on equity and bond markets. The president also noted that the Fed’s earlier easing cycle left too much slack in the economy, making additional tightening essential. Her comments come as markets watch for clues on the Fed’s next moves amid mixed data on price pressures.

Context

Gradual, incremental rate hikes are a common tactic to cool inflation while avoiding a sudden rise in loan costs. The Federal Reserve targets a 2% inflation rate as a stable price environment for the U.S. economy.