Serving as a voter on the Fed's policy committee, Beth Hammack used prepared remarks to underline a preference for speed and precision. "When feasible, I generally think it's preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction," she said at the annual gathering of the National Association of Business Economics. She added, "Considering all the inputs that factor into my reaction function, a restrictive monetary policy stance is appropriate to ensure a timely return to 2 percent inflation."
Hammack also flagged the risk that inflation psychology hardens the longer price pressures stay high. "Long-run inflation expectations have stayed remarkably well anchored despite actual inflation being above target for more than five years," she said. "But I'm not taking that for granted." In her words, "With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy."
Dissenting Fed voices often preview where policy ends up. Market Briefs covers the Fed free every morning.
According to the September meeting minutes, officials indicated that another increase remains possible, though the timing is uncertain. The Fed voted last month to enact its first rate hike in three years, and Hammack's comments leave room for more if data demand it.
Price gauges remain above target. The personal consumption expenditures price index rose 3.4% year over year in August, while the Fed's preferred core measure came in at 3%.
Futures markets, via CME's FedWatch, now assign better than a 78% probability that the central bank holds steady at its meeting later in the month, and peg the odds of a December hike at nearly 88%.
If the Fed opts for quicker, smaller moves, it keeps markets guessing less about big swings while still leaning against inflation. That path can ripple into everything from mortgage quotes to credit card APRs and the sensitivity of growth stocks to each policy step. With inflation still running hot by the Fed's yardstick and December in play, borrowing costs and rate-sensitive assets are likely to keep reacting in real time.
A different path on rate increments changes the whole curve. Get the free Market Briefs daily newsletter and follow the debate.
