Fed’s Hammack says public’s inflation expectations could worsen

Federal Reserve Bank of Cleveland President Beth Hammack expressed worry over Monday that persistent inflation exceeding the central bank's 2% objective could lead to a loss of public confidence in the prospect of prices returning to target. Noting that inflation has remained above target for over five years, Hammack highlighted the risk of an inflationary mindset taking hold.

She emphasized the Federal Reserve's responsibility, stating, "We need to ensure that policy remains restrictive to help bring things back down to target." Hammack also pointed to growth's robust performance and a stable job market, but expressed concerns about inflation being driven by demand. She noted that capital expenditures will contribute to inflation for some time.

The Cleveland Fed president warned that if progress in reducing inflation stalls, public expectations could shift. She also noted numerous long-term questions about the impact of artificial intelligence on inflation.