Cleveland Fed’s Hammack says more aggressive rate rises may be needed if inflation expectations worsen significantly
Updated
Summary
Cleveland Fed President Beth Hammack said the Federal Reserve may need to raise interest rates more aggressively if public inflation expectations deteriorate significantly. Her remark was conditional, not an announcement of a rate decision.
Why it matters
Markets were pricing in approximately a 72% probability that the Fed would leave rates unchanged this month, while the likelihood of a December rate hike had climbed to 92%. Stronger-than-expected US economic data was also reinforcing expectations of further rate increases.
The US 10-year Treasury yield remained below 5.1% on Friday after falling sharply in the previous session; the source attributed the decline to safe-haven demand for government bonds amid a global equity selloff. Separately, investors were increasingly pricing in a potential slowdown in the artificial-intelligence capital-expenditure boom, described as a major driver of the US economy and financial markets.