Cleveland Fed President Hammack said on the 25th that she is increasingly concerned that inflation, which has run above the Federal Reserve's 2% target for years, could erode confidence that price pressures will return to target. Speaking at an event hosted by the Cleveland Fed, Hammack said that with inflation above target for more than five years, "the biggest risk we face on inflation right now is that inflation-thinking becomes entrenched." She said the Fed has a role to play and that "we need to make sure monetary policy is in a restrictive stance to bring prices back down to target." She also said capital investment could remain an inflationary pressure for some time, and flagged vigilance about demand-related price pressures.
Hammack calls for keeping monetary policy in a restrictive stance to bring inflation back to target, implying no near-term rate cuts and upward pressure on the policy rate.
Hawkish Fed commentary warning of entrenched inflation expectations and the need for restrictive policy pushes Treasury yields higher.
