Fed Officials Warn Inflation Will Not Fall Without Action

Federal Reserve Bank of Cleveland President Beth Hammack has expressed concern that inflation will not return to its target without additional action from the central bank. In a statement, she noted that inflation has remained above 2% for over five years and is unlikely to fall on its own.

Hammack emphasized that 'now is the time' for the Fed to cut interest rates to help bring PCE inflation back down to 2%. She warned that waiting could be a costly mistake, as the longer high inflation persists, the more challenging it becomes to control. The labor market remains strong, with unemployment close to its maximum-employment level.

Minneapolis Fed President Neel Kashkari also expressed his support for gradual interest rate hikes, citing recent inflation risks that resemble both the 1970s and the Fed's earlier misjudgment of post-pandemic inflation as 'transitory'. He argued that monetary policy has a crucial role in preventing repeated supply shocks from entrenching higher inflation.