Key insights
- Cleveland Fed President Hammack expressed concern about an "inflationary mindset" becoming entrenched, citing business feedback. This reinforces the hawkish view that the Fed may need to maintain higher interest rates for longer to combat inflation, potentially weighing on US equities as higher rates can dampen economic growth and corporate earnings.
WASHINGTON, May 7 (Reuters) - Federal Reserve Bank of Cleveland President Beth Hammack said on Thursday that she hears concerns from businesses that an inflationary mindset is starting to become entrenched and needs to keep an open mind about the Fed’s next policy move.
Hammack, who dissented at the Fed’s most recent meeting on its decision to maintain language implying that its next move would be a rate cut, said that a series of temporary price shocks, from COVID-19 to Russia’s invasion of Ukraine and the current Iran war, has kept the Fed from reaching its 2% inflation target for more than five years.
"What I hear when I’m out with businesses is I hear concern that an inflationary mindset is starting to become entrenched in people’s minds," Hammack told the Ohio CEO Summit in Columbus. "I hear about the pain of inflation when I’m out talking to individuals."