Fed's Hammack says 'now is the time to act' on raising interest rates

Cleveland Fed President Beth Hammack argues for immediate monetary policy action to combat persistent inflation, which has remained above the 2% target for over five years. Despite recent PCE data aligning with expectations at a 3% annualized rate, current financial conditions lack sufficient restraint as businesses continue to borrow and raise capital at record levels. This high level of market activity suggests the neutral interest rate is higher than many theoretical estimates. While inflation expectations remain anchored, anecdotal evidence from workers in Erie, Pennsylvania, reveals a growing "inflationary mindset" driven by the rising costs of basic goods and services. Addressing these persistent price pressures is essential to prevent long-term economic despair and to ensure the Federal Reserve delivers on its price stability mandate before inflationary behaviors become permanently embedded in the public consciousness.