Fed's Hammack: Gradual rate hikes are the best way to get inflation to target

Cleveland Fed President Loretta Mester's counterpart in this headline, Fed official Hammack, argued that gradual rate hikes represent the most effective path to returning inflation to the central bank's target. The statement signals a preference for measured tightening over aggressive moves, which points to a policy rate that stays higher for longer while the pace of increases is moderated. The transmission runs primarily through the rate differential and real yields: a slower but sustained hiking path keeps front-end Treasury yields anchored at elevated levels, supporting the dollar and weighing on rate-sensitive assets such as long-duration bonds and growth equities. Traders should watch the next Consumer Price Index release and subsequent Fed speakers for evidence on whether core inflation is decelerating fast enough to justify maintaining a gradual pace, since a hot print would likely reprice the market toward a more aggressive path.

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