Cleveland Federal Reserve President Beth Hammack said that restrictive monetary policy remains appropriate to bring inflation back to the Fed's 2% target. She favors making smaller rate adjustments quickly rather than waiting, which could necessitate a larger correction later.
Speaking at the National Association for Business Economics annual meeting, Hammack, a voting member of the Federal Open Market Committee, noted that the breadth of current price pressures means inflation will take considerable time to reach target levels. August data underscores the gap: the personal consumption expenditures price index, the Fed's preferred inflation gauge, rose 3.4% annually, while core PCE, which excludes food and energy, stood at 3%.
With inflation running above target for more than five years, Hammack warned of risks associated with prolonged elevated price pressures. "With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy," she said.
Market Expectations Shift Toward December Hike
The Federal Reserve raised rates in September for the first time in three years, with subsequent meeting minutes signaling another hike without specifying timing. CME FedWatch data shows traders now assign an 84.7% probability to a rate move at the December 9 meeting, with 69% of that probability centered on a 25 basis point increase.
Rate hike expectations have lifted the US Dollar Index to an 18-month high, as higher rates make dollar-denominated assets more attractive to investors.
Bitcoin Faces Headwinds from Dollar Strength
Bitcoin trades at $81,661, down 2.56% over 24 hours, approximately 35% below its all-time high of $126,080 set on October 6, 2025. The cryptocurrency has declined 1.89% through October, historically one of Bitcoin's strongest months. Since 2013, only three Octobers have closed in the red: 2014, 2018, and 2025.
October marks the beginning of Q4, which has averaged a 71.43% gain since 2013, the highest average performance of any quarter. Wednesday's September Consumer Price Index release will provide traders fresh economic data before the Fed's October 28 meeting. Futures also assign a 15.7% probability to a larger 50 basis point December increase.
