Federal Reserve officials who voted against holding interest rates steady this week say action is needed now to combat inflation. Beth Hammack, president of the Federal Reserve Bank of Cleveland, and Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, favor hiking rates to stave off inflation.
Hammack said in a statement that now is the time for the Federal Open Market Committee to act and speed the return of PCE inflation to the 2 percent objective. She noted that the longer high inflation persists, the more challenging and costly it can be to bring it back down.
Inflation has held above the Fed’s 2 percent target for more than five years, spiking again after the Iran war and the impact of President Donald Trump’s tariffs. Though price increases eased in June, energy costs have risen again, generating fears that the Fed will have to tighten.
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Kashkari believes that small hikes now can prevent the need for larger moves later. He said that a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary.
Kashkari and Hammack joined Dallas Fed President Lorie Logan in dissenting against holding the Fed’s key overnight borrowing rate steady. The other nine voting members of the FOMC voted in favor of keeping the rate steady, where it has been all year following a series of three cuts in the latter part of 2025.
Fed Chairman Kevin Warsh said he remains resolute in getting inflation back to target, but Hammack expressed concerns that it may not return to the objective on its own. She noted that supply-side factors, including energy prices, have boosted inflation this year, but she also sees inflationary pressures coming from the demand side of the economy.
As the Fed considers its next move, Kashkari‘s comments recall the 1970s period of high inflation and the more recent episodes in which Fed officials initially dismissed the flare-up as “transitory”. He believes that monetary policy has an important role to play in addressing a series of successive supply shocks that might lead to entrenched higher inflation.
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Hammack said that her constituents in the Cleveland area have been describing pricing pressures as broadening rather than fading, and consumers are expressing despair over persistently higher prices. This sentiment is likely to be a key consideration for the Fed as it weighs its options for addressing inflation.
They will continue to monitor the situation and consider their next move. Logan is expected to release a statement explaining her vote later, which may provide further insight into the Fed’s thinking on inflation.
The Fed’s decision to hold interest rates steady for now may be a temporary reprieve, but it is clear that inflation remains a major concern for the central bank. As Hammack noted, the longer high inflation persists, the more challenging it can be to bring it back down, making it essential for the Fed to take a proactive approach to addressing this issue.
