Hammack Warns Elevated Inflation Could Entrench Higher Expectations

Federal Reserve Bank of Cleveland President Beth M. Hammack has warned that six years of elevated inflation could lead to higher expectations, making it more costly to restore price stability at the Federal Reserve's 2% target.

Hammack emphasized the importance of preventing an 'inflationary mindset' in delivering on the 2% objective and said increases in inflation expectations that threaten this goal warrant taking decisive action.

She questioned whether monetary policy was restrictive enough to return inflation to 2%, stating that she is more concerned about persistently elevated inflation than risks to full employment.

Hammack's position follows her dissent from language in the April FOMC statement, where she supported holding rates steady citing broad-based inflation pressures and rising oil prices. She also stated that FOMC communications anchor inflation expectations, which affect actual inflation outcomes.