• Cleveland Fed President Beth Hammack says inflation remains her primary concern, with prices still rising too fast.
  • She advocates keeping policy restrictive for longer, pushing back against market expectations of near-term rate cuts.
  • Hammack's hawkish stance aligns with a minority of FOMC members who worry that disinflation has stalled.

Inflation Stays Stubborn

Federal Reserve Bank of Cleveland President Beth Hammack reiterated her hawkish outlook on Thursday, warning that inflation is "still too high and is still rising" in some pockets of the economy. Speaking at a conference in Columbus, Ohio, Hammack said she needs to see "convincing evidence" that price pressures are sustainably heading back to the Fed's 2% target before supporting any easing of policy.

Her remarks come on the heels of data showing core services inflation—excluding housing—accelerated to a 4.1% annual rate in the first quarter, according to the latest personal consumption expenditures report. "We cannot declare victory yet," Hammack said. "The labor market remains strong, and that gives us the luxury to be patient."

The Cleveland Fed chief's comments underscore a deepening split within the Federal Open Market Committee. While Chair Jerome Powell has signaled that the next move is likely a rate cut, a vocal minority—including Hammack and Governor Michelle Bowman—has warned that cutting too soon could reignite price pressures.

Market Implications

Traders trimmed bets on a September rate cut after Hammack's remarks, with the implied probability slipping to 58% from 67% a week ago, according to CME FedWatch. The two-year Treasury yield, which is sensitive to policy expectations, edged up three basis points to 4.73%. The dollar index pared earlier losses.

"Hammack is one of the more hawkish voices, but she's not alone," said Ellen Zentner, chief U.S. economist at Morgan Stanley. "The risk is that the Fed stays on hold through the election, even if growth slows."

A Question of Credibility

Hammack also pushed back against the notion that the Fed's 2% target might be too low in a world reshaped by tariffs and deglobalization. "We have a symmetric target, and we're committed to achieving it," she said. "History shows that allowing inflation to settle above target erodes confidence and leads to higher long-term rates."

Her stance echoes concerns among some policymakers that the economy's resilience—with GDP growing at a 2.8% annual rate in the second quarter—gives the Fed little reason to ease. "If we cut too early, we risk having to reverse course," she warned. "That would be the worst outcome for both employment and price stability."

A Fed spokesperson confirmed Hammack's remarks were her own and not intended to signal FOMC consensus. The Cleveland Fed president does not vote on policy this year but participates in deliberations.

Correction: An earlier version of this article misstated the timing of Hammack's speech. It was delivered on Thursday, not Wednesday.