U.S. Federal Reserve: “Slight and frequent interest rate adjustments are desirable… risk of inflation sticking”

(New York = Yonhap News) Correspondent Lim Soo-jeong = Beth Hammack, president of the Cleveland Federal Reserve Bank, expressed the opinion on the 12th (local time) that "small frequent adjustments" to interest rates rather than large adjustments all at once would help prevent inflationary sentiment from becoming entrenched.

President Hammack said this in a speech at the National Association for the Real Economy (NABE) annual meeting held in Cleveland, Ohio on this day, diagnosing that “inflationary pressures are appearing relatively broadly rather than being concentrated in specific sectors.”

He said, “If possible, I think it is more desirable to make small adjustments relatively quickly rather than delaying policy adjustments and running the risk of needing larger trajectory corrections.”

Governor Hammack expressed concern that inflationary pressures are appearing in areas other than energy prices.

He said, “The rise in oil prices, gasoline, and diesel prices has attracted attention this year, but this is not everything,” and said that companies in the jurisdiction plan to increase sales prices by a larger amount than the cost increase rate.

In particular, it was pointed out that the increase in demand due to the expansion of artificial intelligence (AI) infrastructure is driving up the prices of computer, electronic, and high-tech components, increasing the cost burden not only in data centers but also in the aviation, power generation, and construction fields.

President Hammack explained that the basic inflation rate in the United States, estimated by Cleveland Fed researchers, is currently in the mid to high 2% range.

Governor Hammack emphasized, “Even if an appropriate monetary policy is implemented, it will take time for the inflation rate to return to 2%,” adding, “A restrictive monetary policy stance is appropriate to return the inflation rate to 2% in a timely manner.”

However, it was not clearly stated whether it would support further interest rate increases at the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve, which will be held on the 27th and 28th.

The market expects the Federal Reserve to freeze the base interest rate at the current 3.75-4.00% per annum.