Inflation fears could push Fed to raise interest rates, key official says
Beth Hammack, president and chief executive officer of the Federal Reserve Bank of Cleveland, during a Bloomberg Television interview in New York, US, on Friday, Aug. 1, 2025. Hammack said the US labor market still appears healthy, though fresh jobs
Amid fears that prices are starting to rise too quickly again, the Federal Reserve may opt to tap the brakes on inflation with a potential rate hike later this week, a top official warned.
In an interview with the Associated Press, Federal Reserve Bank of Cleveland President Beth Hammack laid out the scenario that could cause the cost of borrowing to rise, as well as reasons rates could go the other way.
Big picture view:
The consumer price index increased by 2.4 percent in February, slightly above the central bank’s two percent goal for inflation. However, the fallout from higher gas and energy prices could push that number higher. The federal government is expected to release its March inflation report on Friday.
By the numbers:
The latest report is the first one that will include the effects of the spike in energy prices since the beginning of the Iran war. The Associated Press noted economists are predicting that inflation could jump to 3.1 percent, citing a FactSet survey. Hammack cautioned that the upward trend could continue, with the Cleveland Fed already estimating a 3.5 percent rise in April.
Dig deeper:
A rise in inflation could prompt Fed officials to raise rates, which trickles down to consumers and businesses in the form of higher costs on things like mortgages, auto loans, and credit cards.
On the other hand, Hammack also sees a scenario where the Federal Reserve may opt to lower rates. She posited Fed officials may take that route if gas prices slow the economy and unemployment rises, adding that it would be her preference to keep them the same "for quite some time."
Trump's push for lower rates
Should the Federal Reserve raise interest rates, the move could cause President Donald Trump to lash out, the Associated Press noted. He has previously called for the board, which is an independent body, to drop its key interest rate from its current level of around 3.6 percent all the way down to one percent.
A Federal Reserve decision on interest rates is expected to come late this month.
The Source: Source: Information for this article was taken from the Associated Press. This story was reported from Orlando.