Hammack calls for Fed action on inflation as September hike odds top 60%

Hammack's remarks give the Federal Reserve one more hawkish voice as it heads into the 15-16 September meeting, with the central bank looking unusually divided. The market has already priced in slightly above 60 percent odds of a rate increase after Friday's robust jobs data. Her view — that policy is not restrictive enough rather than just on hold — leaves short-term rates and the dollar exposed to upside risk until the blackout period begins. As one of the three dissenters against July's decision to hold, Hammack is not really offering fresh information; her comments amount to a confirmation of how fast sentiment has moved since the jobs report.

Greg filed this piece on Friday:

• Hammack, of the Cleveland Fed, is coming across as firmly hawkish on policy

For those who missed it, Cleveland Fed president Beth Hammack said Friday that the moment has arrived for action on inflation, just as a solid jobs report lifted expectations for a rate increase above 60 percent.

Summary:

• In a LinkedIn post on Friday, Cleveland Fed leader Beth Hammack said the central bank should move now to bring inflation down.
• She said the numbers and the reports she hears from her district both indicate that monetary policy is not restraining the economy enough.
• Hammack recounted a discussion with a manufacturer in Northeast Ohio, who urged the Fed to increase rates because many input prices are rising at double-digit rates.
• She was one of three members who voted against the Fed's July decision to leave interest rates unchanged.
• The FOMC will gather 15-16 September to decide on rates, with a communications blackout beginning at midnight.
• After Friday's unexpectedly strong jobs report, investors assign slightly above 60 percent odds to a rate increase this month.

From Friday, in case it slipped past you: Beth Hammack, the Cleveland Fed president, said the central bank has reached the point where it should act to reduce inflation, per Bloomberg and Reuters coverage of her Friday LinkedIn post. She said the data and the accounts coming out of her district suggest policy is not weighing heavily enough on the economy at present.

Hammack wrote that she spoke with a Northeast Ohio manufacturer who called for higher interest rates, citing double-digit inflation across many of the prices he pays for inputs. Her July dissent, when she joined two other Fed policymakers in opposing the hold decision, places her on the hawkish end of the committee as this month's meeting approaches.

The Federal Open Market Committee is scheduled to vote on rates on 15-16 September, and policymakers go into a communications blackout at midnight before the session begins. That blackout restricts how much additional public guidance officials can provide ahead of the decision.

The timing of her remarks carries as much weight as what she said. They came out the same day as an unexpectedly strong jobs report, which pushed market pricing in a more hawkish direction. Investors currently see slightly above 60 percent odds of a rate hike at this month's meeting, a notable swing from the expectations in place before Friday's numbers.

Viewed as a whole, Hammack's comments express her own stated preference for tighter policy — not a decision by the Fed or a change in formal guidance — but they land at a time when the wider run of data is already moving market expectations toward the outcome she favours.