Federal Reserve Bank of Cleveland President Beth Hammack has a message for her colleagues: don't wait for inflation to disappear on its own, because it won't. In a statement Friday, she made the case that the time to act is now.
"Inflation has remained stubbornly above 2% for more than five years, and I am not confident it will return to our objective on its own," Hammack said. She argued that "now is the time" for the Fed to cut interest rates to help bring PCE inflation back to its 2% target and uphold its commitment to price stability. "The longer that high inflation persists, the more challenging and costly it can be to bring it back down," she added.
Hammack sees inflation pressures building from both supply and demand sides. Businesses are reporting broader pricing pressures, and consumers are increasingly frustrated by persistently high prices. With the labor market still strong and unemployment near its maximum-employment level, she says controlling inflation should be the Fed's top priority.
Kashkari Backs Gradual Rate Hikes
Minneapolis Fed President Neel Kashkari is singing a similar tune, but with a different melody. He favors gradual interest rate hikes now to avoid the need for more aggressive policy moves later. Kashkari warned that recent inflation risks resemble both the 1970s and the Fed's earlier misjudgment of post-pandemic inflation as "transitory." He argued that while monetary policy is primarily meant to curb demand-driven inflation, it also has an important role in preventing repeated supply shocks from entrenching higher inflation.
Warsh Stays Hawkish On Rates
Hammack and Kashkari were joined by Dallas Fed President Lorie Logan in dissenting from the Fed's decision to keep its benchmark interest rate at 3.5%–3.75% on Wednesday. Despite their opposition, the other nine voting members of the FOMC voted to leave rates unchanged, where they have remained throughout 2026 after three rate cuts in late 2025.
Fed Chairman Kevin Warsh remains firmly committed to bringing inflation back to the Fed's target, stressing that more than five years of above-target inflation cannot be reversed in just a few months or with a single month of modest price declines. When asked if June's softer inflation data influenced policymakers' decision to keep rates unchanged, he was unequivocal: "In two words, 'not much.'"
Trump on Warsh's Decision
President Donald Trump reiterated his support for Fed Chair Kevin Warsh, calling him "brilliant" despite the Federal Reserve not delivering the interest rate cuts he has sought. Trump said Warsh also favors lower rates but noted any decision requires approval from the Fed's Board of Governors. "He's got a board, and it's a political board, and they want to keep rates up. But we fight through rates," he told reporters in the Oval Office on Wednesday.
