The head of the Federal Reserve of Cleveland is raising concerns that years of high inflation could bake in increasing costs into the economy.
Cleveland Fed president Beth Hammack made the comments Tuesday during an appearance at the City Club of Cleveland.
鈥淭here鈥檚 a growing risk that inflation could remain elevated if energy costs do not come down quickly and if businesses feel they have no choice but to raise prices,鈥� Hammack said. 鈥淭his would be a bad development.鈥�
Hammack said the Fed should keep interest rates at their current levels and be prepared to raise them if needed.
鈥淏ased on the data, I鈥檓 more concerned about the growing risks of persistently elevated inflation than the risks to full employment, and that monetary policy may not be sufficiently restrictive to bring inflation down to 2%.鈥�
But Hammack also said the American economy is resilient and that the AI boom is helping keep it moving forward.
鈥淎ll those positives are helping to keep employment, I think, at a reasonable level,鈥� she said.
Hammack did, however, share that hiring remains flat. 鈥淲e鈥檝e been stable on the unemployment rate, but we鈥檙e not creating that many new jobs. We think that鈥檚 because of the sharp changes we鈥檝e had in immigration. You don鈥檛 have to create that many new jobs to keep the unemployment rate stable.鈥�
She said tariffs and the war in Iran are the main factors keeping inflation high, and that an end to the war would not immediately bring down fuel prices.
鈥淓ven if the Strait [of Hormuz] was opened tomorrow, it鈥檚 going to be months before we actually rebuild that flow of oil, before a lot of those supply chain disruptions come through.鈥�
Hammack said the Fed needs to stay focused on bringing down inflation.
鈥淚t鈥檚 not just oil; it鈥檚 not just tariffs. It鈥檚 health insurance; it鈥檚 broader energy prices. There are a lot of underlying material costs, so I鈥檓 seeing it in a lot of different places, and that鈥檚 what I need to focus on.鈥�
The inflation rate in April was 3.8%, well above the Fed鈥檚 2% target.
Hammack has been president of the Federal Reserve Bank of Cleveland since 2024.
As president and CEO, she oversees 1,100 employees in the Bank's Cleveland, Cincinnati and Pittsburgh offices who conduct economic research, supervise banking institutions and provide payments services to commercial banks and the U.S. government.
Cleveland serves the Fourth Federal Reserve District, which encompasses Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. Its mission is to ensure banks are trustworthy and secure, to keep the financial system running, and to represent Fourth District priorities on the national stage.
Cleveland is one of 12 Federal Reserve Banks around the nation.
The Federal Reserve was established more than 100 years ago to address stresses in the banking system. The agency is comprised of the Board of Governors and the 12 Federal Reserve Banks around the nation.
