Fed's Hammack favours gradual rate rises as the best policy path

Gradual interest rate increases cause less disruption to the economy and financial system, Cleveland Federal Reserve President Beth Hammack said on Thursday, according to Reuters.

Main points from Hammack’s remarks

"Monetary policy needs to move to a restrictive stance."

"Gradual rate-hike path is the best way forward for monetary policy."

"US central bank's independence is critical to get inflation to 2%."

"Gradual rate hikes best way to make sure us central bank gets inflation back to 2%."

"Inflation has been too high, moving in wrong direction."

"Dollar remains word’s top reserve currency."

Hammack reinforces hawkish Fed tone with support for gradual rate rises and restrictive policy

An FXS Speechtracker score of 8.1/10, compared with the established baseline of 7.6/10, highlighted the unusually strong tightening bias in Hammack’s distinctly hawkish remarks. Her argument that “gradual rate hikes” are “less disruptive” but remain necessary to bring monetary policy to a “restrictive stance” pointed to a clear preference for further tightening over a pause. That message was reinforced by her warning that inflation is “too high” and “moving in the wrong direction”.

A 1.05-point increase took the FXS Fed Sentiment Index to 145.23, indicating that Hammack’s comments shifted the Fed’s overall tone further towards hawkishness. Remaining well above the neutral 100 level, the index points to a policy bias favouring further rate rises and a prolonged restrictive stance, in line with the elevated FXS Speechtracker score.