Fed’s Hammack: Inflation problem is broader than just tariffs

Fed’s Hammack: It would take a lot to dethrone dollar’s global role Fed’s Hammack: Inflation problem is broader than just tariffs Fed’s Hammack: It would take a lot to dethrone dollar’s global role

Federal Reserve Bank of Cleveland President Beth Hammack emphasized that inflation remains a persistent challenge driven by factors beyond tariffs, including rising healthcare and energy costs, as well as structural shifts like artificial intelligence adoption. In a speech to the Pittsburgh Economic Club, Hammack stated that monetary policy should remain "somewhat restrictive" to apply downward pressure on inflation, which has exceeded the Fed's 2% target for over four years. She highlighted that businesses across sectors—particularly in construction, manufacturing, and retail—are grappling with elevated expenses, including insurance premiums, electricity, and imported materials, which contribute to inflationary pressures according to her analysis.

Hammack also noted that while tariffs have amplified costs for import-dependent firms, inflationary forces are broader, with core services inflation excluding housing remaining elevated at 3.4% in August 2025. She cautioned against viewing inflation as a transitory issue, stressing that prolonged deviations from the 2% target risk embedding higher inflation expectations into the economy.

On the labor market, Hammack acknowledged softening job growth but maintained that current conditions remain broadly healthy, with the unemployment rate near its estimated long-run level of 4.25%. She advocated for a balanced approach to the Fed's dual mandate, prioritizing inflation control while monitoring risks to employment. With financial conditions appearing accommodative—despite higher nominal interest rates—Hammack suggested that monetary policy is only "barely restrictive," if at all, and urged caution before further rate cuts.

Hammack's remarks align with her skepticism of aggressive rate reductions, even as geopolitical tensions, such as the Middle East conflict, introduce new inflationary risks. She emphasized the need for patience as the Fed assesses evolving economic signals before adjusting policy.