Inflation Action Needed Now, Say Fed Officials Who Voted for Rate Hike

The Federal Open Market Committee of the Federal Reserve voted 9-3 last week to hold steady on interest rates.

Those three no voters favored hiking rates now as a way to ward off inflation, and they’ve spoken out about their reasoning.

“In my view, now is the time for the [Federal Open Market Committee] to act to speed the return of PCE inflation to our 2 percent objective and deliver on our commitment to price stability for the American people,” Cleveland Fed President Beth Hammack said in a statement. “The longer that high inflation persists, the more challenging and costly it can be to bring it back down.”

Minneapolis Fed President Neel Kashkari said in a separate statement that he thinks small hikes now can prevent the need for larger moves later.

“In my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary,” Kashkari said.

Hammack and Kashkari joined Dallas Fed President Lorie Logan in dissenting against holding the Fed’s key overnight borrowing rate in a range between 3.5%-3.75%, CNBC reported. 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.

Inflation Holds Above 2%

Inflation has held above the Fed’s 2% target for more than five years, spiking again after the onset of Iran war and the impact of President Donald Trump’s tariffs.

Logan noted that the Fed cannot count on an unexpected jolt to the economy to lower inflation and needs to be proactive.

“Labor, consumption and financial market conditions indicate that monetary policy is not restraining the economy,” Logan said in a statement. “Without any policy restraint, inflation will likely continue to trend above target until there’s an unanticipated shock.”

CNBC noted that although price increases eased in June as Middle East tensions briefly tempered, energy costs have gone up again and generated fears that the Fed will have to tighten.

Though he voted in favor of the hold, Fed Chairman Kevin Warsh said he is still resolute in getting inflation back to target, CNBC said.

“We have begun a new chapter, and we understand that the five-plus years of inflation above target cannot be cured in nine weeks — or by a single month of modest price decreases,” Warsh said.

Hammack said she is “not confident it will return to our objective on its own,” however.

“Supply-side factors, including energy prices, have boosted inflation this year, but I see inflationary pressures coming from the demand side of the economy, as well,” Hammack said.

‘Consumers Expressing Despair’

Hammack said 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.”

Kashkari’s comments harken back to both the 1970s period of high inflation and the more recent episodes in which Fed officials initially dismissed the flare-up as “transitory” and brought on up issues related to the Covid pandemic, according to CNBC.

“Economic theory argues that monetary policy is the right tool to address demand-driven inflation but faces greater trade-offs when dealing with supply shocks,” Kashkari said, adding, “I increasingly believe that monetary policy does have an important role to play in addressing a series of successive supply shocks that might lead to entrenched higher inflation.”