Fed Hammak: Further policy tightening is needed to reduce inflation

On October 13, Cleveland Fed Chairman Hamack pointed out that the Fed should push monetary policy into a restrictive range to push inflation back to its target level of 2%. She emphasized that the current policy framework may extend the inflation downturn cycle beyond what the market can tolerate, and therefore advocated that "more tightening is needed." Regarding future interest rate hikes, Hamak said that the timing is not yet clear, but prefers to adopt a "gradual, high-frequency" policy adjustment rhythm to assist companies and households in making forward-looking deployments. She analyzed that the continuous rise in corporate costs has triggered a price transmission mechanism. If the demand side cannot effectively curb price increases, inflation may remain high or even rise further. Hammak warned that the most serious inflation risk comes from the formation of "inflation expectations" by market participants, which will weaken the Fed's ability to regulate, and signs of this are already emerging. In response to the recent rise in US bond yields, she believes that this is mainly due to multiple factors such as improved economic growth expectations, market reassessment of the Fed's policy path, increased fiscal pressure and large-scale bond issuance. She also noted that while the data center investment boom is supporting economic expansion, the financial environment still needs to tighten more aggressively to meet the inflation cooling target. Hammak reiterated that the Fed's policy independence "is always critical." (Jin Shi)