Hammack Warns Sticky Inflation Could Complicate Fed's Path Back to 2%

Cleveland Fed President Beth Hammack warned that sticky inflation could make it harder for the Federal Reserve to return to its 2% target. She described the current economic backdrop as solid output and demand, but pointed out supply shocks as a challenge for monetary policy.

Hammack said price stability sits with central banks and emphasized that inflation risks are tilted to the upside. She also noted that the longer above-target inflation persists, the more difficult it becomes to bring price growth back down.

Market gauges portrayed her remarks as hawkish, but slightly softer than usual. The US Dollar Index (DXY) was up 0.14% at about 101.25, and the CME FedWatch tool put the probability of an October rate hike at roughly 71%, up from around 55% a week earlier.