Key Fed official sees possible rate hike amid higher gas prices, inflation concerns

A senior Federal Reserve official says the next move in interest rates could still be an increase if inflation remains too high, even as higher gas prices complicate the outlook.

AP reported Monday that Cleveland Fed President Beth Hammack said a rate hike could be appropriate if inflation stays persistently above the Fed’s 2% target. But she also said that if higher gas prices weigh on the economy and push up unemployment, the Fed could still be forced to cut rates instead.

The remarks reflect a shift away from any simple expectation that the Fed’s next move will be lower. They also show how energy prices can cut both ways: they can keep inflation elevated, but they can also weaken consumer spending and growth.

The Fed has already discussed the possibility of a future increase. In its March 18 press conference transcript, Chair Jerome Powell said the committee had considered that the next move might be a rate hike, though it was not the baseline view. A March 26 speech by Vice Chair Philip Jefferson also said consumers are already seeing higher gas prices and that energy shocks can influence inflation and spending.

Hammack’s comments do not signal an immediate policy change. Instead, they underline that the central bank is still watching the balance between inflation persistence and growth risks as it weighs its next move.

For now, the message from Fed officials is that higher gas prices are keeping the policy outlook open, not locked in.