U.S. Fed’s Hammack: Small, frequent rate adjustments preferable; risk of entrenched inflation

[Financial News] Beth Hammack, president of the Federal Reserve Bank of Cleveland, said she believes that making small, frequent interest-rate adjustments, rather than large adjustments all at once, helps prevent inflation from becoming entrenched.
On the 12th (local time), Hammack said in a speech to the National Association for Business Economics (NABE) in Cleveland, Ohio, that “inflationary pressures are relatively broad-based rather than concentrated in specific sectors.” She added, “Where possible, it is preferable to make relatively prompt, modest adjustments rather than delay policy adjustments and risk needing a larger course correction later.”
Hammack expressed concern that inflationary pressures are also emerging outside the energy sector. “Rising oil, gasoline and diesel prices have drawn attention this year, but that’s not the whole story,” she said, adding that “local businesses plan to raise selling prices by more than the increase in their costs.” Hammack noted in particular that “growing demand from the expansion of AI infrastructure is driving up prices for computer, electronics and advanced-technology components, increasing cost pressures not only for data centers but also for aviation, power generation and construction.”
Hammack explained that “the underlying U.S. inflation rate estimated by researchers at the Federal Reserve Bank of Cleveland is currently in the mid-to-high 2% range.” She said, “Even with appropriate monetary policy, it will take time for inflation to return to 2%,” and emphasized that “a restrictive monetary policy stance is appropriate to return inflation to 2% in a timely manner.”
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