Fed's Hammack Warns of Inflation Becoming a New Normal

Federal Reserve Bank of Cleveland President Beth Hammack expressed concern about persistently high inflation and its potential impact on consumer expectations. Speaking at an event, she stated that if inflation becomes entrenched as a norm, it could condition the public to accept elevated prices.

Hammack emphasized that the central bank's policy should be restrictive to bring inflation back down to target, which is currently 2%. The personal consumption expenditures price index was up 3.7% in July versus a year ago, exceeding the Fed's goal.

The official noted that high inflation is not solely caused by external shocks such as trade tariffs and energy impacts, but also by robust demand tied to the solid performance of the economy and job market stability. Hammack stated that interest rates are not yet restraining investment in the economy, but if it creates more inflationary pressures, policy should address it.