Fed's Hammack says the question now is how fast to raise rates, not whether

Cleveland Fed President Beth Hammack says the debate has shifted to the pace of rate increases. Other officials are also pressing for tighter policy, while long-dated Treasury yields have eased back from a high set around October 1.

Federal Reserve Bank of Cleveland President Beth Hammack says the central bank now faces a question of pace rather than direction. The issue is how fast to make policy more restrictive, not whether to raise rates further.

Hammack wants smaller, more frequent rate moves. She said policy needs to cool the economy “at the margins.” Business contacts describe conditions as strong to booming, she said. Low-income households, however, have moved from trading down to cheaper goods to deciding which bills to pay. Her comments on Monday, October 12, extend an argument she has made since September, when she warned of an inflationary mindset and inflation above the Fed’s target.

Her view lines up with Fed Governor Christopher Waller, who has said more hikes are needed but not necessarily back to back. Minutes from the September meeting showed unanimous support for that month’s hike, with most officials expecting another by year-end.

Hammack sits with Goolsbee, Logan and Alberto Musalem in pushing for more restriction. Jefferson and Williams favor patience. Musalem has said a timely return to 2 per cent inflation is essential. He also expects strong demand for capital from AI investment and government borrowing to keep interest rates higher than in the past.

The 30-year mortgage rate has climbed for seven straight weeks, reaching 7.4 per cent as of October 8. Long-dated Treasury yields touched a high near 5.24 per cent around October 1 before pulling back.

If the hawkish camp prevails over those urging patience, long-dated Treasury yields and mortgage rates face renewed upward pressure rather than the relief markets had briefly priced.