Fed's Hammack says US rates may need to rise again to stop an 'inflationary mindset'

The US Federal Reserve may have to raise interest rates again, and quickly, Cleveland Fed President Beth Hammack said on Monday 12 October 2026. Hammack, a voting member of the Fed's rate-setting committee, told the National Association for Business Economics that "a restrictive monetary policy stance is appropriate to ensure a timely return to 2 percent inflation," CNBC reported.

Her case for moving fast: "When feasible, I generally think it's preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction."

Why she is worried

• Inflation has missed the target for years. The Fed has been above its 2% goal for about five and a half years, Hammack said, according to FXStreet's summary of her remarks.
• The latest numbers: the PCE price index, the Fed's preferred gauge, rose 3.4% in the year to August; the core reading, without food and energy, was 3%.
• The "inflationary mindset": "With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy," she said. Long-run expectations have stayed "remarkably well anchored", but "I'm not taking that for granted."
• AI and broad demand: she said price pressures have spread beyond energy, and that demand-side pressure from AI spending is "not self-correcting", FXStreet reported. She expects it to take "some time" to get back to 2%.

Where the Fed stands

The Fed raised rates last month for the first time in three years, and the minutes of that September meeting showed officials open to voting for another hike, without saying when. Markets do not expect it this month: CME's FedWatch tool put the chance of no change at the October meeting above 78%, but priced a nearly 88% chance of a hike in December, CNBC said. Wednesday's US consumer price figures, which economists expect to show inflation picking up again according to CoinDesk, are the next test.

Why Pakistan watches the Fed

Higher US rates tend to make the dollar stronger and draw money out of emerging markets, which can put pressure on currencies such as the rupee and on the cost of Pakistan's dollar borrowing. FXStreet showed the dollar firmer against the euro, pound and Swiss franc after her remarks. The interbank rupee stood at about Rs 276.97 to the dollar today on our dollar rate page, and the State Bank's policy rate is 11.5% (policy rate page). Gold, which Pakistanis buy as a hedge, usually struggles when US rates rise; today's tola price is on our gold page.

If you earn in dollars as a freelancer or receive remittances, a firmer dollar means more rupees per dollar; if you are paying a dollar bill or a foreign university fee, it costs more. Our currency converter shows today's sums.

For the oil shock that is feeding US inflation fears, see Brent above $105, and for crypto's reaction, today's bitcoin move.