Fed's Hammack: 'Now Is the Time to Act' on Raising Rates

Cleveland Federal Reserve President Beth Hammack has repeated her call for higher interest rates, saying recent data shows the central bank remains too far from its inflation goal.

A report released Wednesday showed inflation running around 3% annualised. Although monthly price increases have slowed over recent months, Hammack argued the Fed should tighten.

"I don't want to prejudge anything. But I believe now is the time to act," she said in a live CNBC interview from the Fed's annual symposium in Jackson Hole. "I believe that we've been in an inflationary situation for more than five years. It's been running well above our target. I don't see any restriction in policy when I look at financial conditions and when I talk to market participants."

The dissent behind the remark

Hammack is a voting member of the Federal Open Market Committee this year, and at the July meeting she was one of three dissenters against holding the policy rate in a 3.5%-3.75% range.

Three dissents is a substantial number for a committee that prizes consensus, and it indicates the internal debate is closer than the published decision suggests.

The argument she is making

Her strongest claim is not about the inflation print but about financial conditions. A policy rate can look restrictive on paper while equity valuations, credit spreads and lending activity all indicate that money is not, in practice, tight.

If that reading is right, the current rate is not slowing the economy and the committee has been holding a position that only appears cautious. It is the case for hiking that does not depend on the next data release — which is why she can make it while saying she does not want to prejudge anything.