Two senior Federal Reserve officials who opposed this week’s decision to keep US interest rates unchanged have argued that the central bank should begin raising rates now to prevent inflation from becoming more deeply entrenched.
Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari said on Friday that early policy action would help bring inflation back to the Federal Reserve’s long-term target of 2% while reducing the need for more aggressive tightening in the future.
In a statement explaining her dissent, Hammack said the Federal Open Market Committee (FOMC) should act sooner rather than later.
She said prolonged inflation could become increasingly difficult and costly to control if policymakers delay action.
“The longer that high inflation persists, the more challenging and costly it can be to bring it back down,” Hammack said.
Kashkari echoed the view, arguing that a gradual increase in interest rates now would be preferable to larger rate hikes later if inflation continues to strengthen.
According to Kashkari, a series of modest policy adjustments could help prevent the economy from requiring more aggressive monetary tightening in the future.
At its latest policy meeting, the Federal Open Market Committee voted to keep the benchmark federal funds rate unchanged at 3.50% to 3.75%.
However, Hammack and Kashkari joined Dallas Fed President Lorie Logan in voting against the decision. The remaining nine voting members supported maintaining current interest rates, which have remained unchanged throughout 2026 following three rate cuts in late 2025.
Inflation has remained above the Federal Reserve’s 2% target for more than five years. Recent price pressures have been driven by higher energy costs, geopolitical tensions and the impact of US trade tariffs.
Although inflation eased slightly in June following a temporary decline in energy prices, renewed increases in oil and fuel costs have raised concerns that inflation could remain elevated for longer than expected.
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While supporting the decision to keep rates unchanged, Federal Reserve Chair Kevin Warsh said the central bank remains committed to restoring price stability.
He noted that several years of above-target inflation cannot be reversed within a short period and emphasised that policymakers remain focused on achieving their inflation objective.
Hammack, however, said she was not convinced inflation would return to target without additional policy action. She pointed to both supply-side pressures, including higher energy prices, and continued demand-driven inflation across the economy.
Businesses in the Cleveland region have reported that pricing pressures are widening across sectors, while consumers continue to struggle with persistently high living costs, she added.
Kashkari also drew comparisons with previous periods of high inflation, including the 1970s and the post-pandemic surge in prices. He said successive supply shocks can eventually lead to persistently high inflation expectations, requiring monetary policy to play a more active role.
He argued that while central banks traditionally respond to demand-driven inflation, repeated supply disruptions can also justify policy intervention if they risk embedding higher inflation into the economy.
Investors will now closely watch upcoming inflation and employment data, as well as future Federal Reserve meetings, for clues on whether policymakers move towards an interest rate hike in the coming months.
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