Fed Official Signals Possible Rate Hikes on Persistent Inflation

A top Federal Reserve official indicated on Monday that the central bank may need to raise interest rates if inflation persists above its 2 percent target, amid rising gas prices fueled by the ongoing Iran war.

Beth Hammack, president of the Federal Reserve Bank of Cleveland, shared this view in an interview, noting her preference to hold the benchmark rate steady for an extended period. The current rate stands at about 3.6 percent. She outlined scenarios where the Fed could adjust policy in either direction: lowering rates if elevated energy costs weaken the economy and increase unemployment, or hiking them to combat stubborn price pressures. "I can foresee scenarios where we would need to reduce rates if the labor market deteriorates significantly," Hammack said. "Or I could see where we might need to raise rates if inflation stays persistently above our target."

Her remarks highlight concerns among some policymakers that inflation, already above target for more than five years, could accelerate due to the conflict that began on February 28 and has now entered its sixth week. Gas prices have surged to an average of $4.12 per gallon nationwide, according to AAA, marking an...