Hammack: Treasury rates 'modest' by historic measures

Federal Reserve official Hammack offered the following remarks:

• Hammack described current Treasury rates as "modest" by historic standards.
• A return to a 3% home mortgage rate would likely signal that something had gone wrong in the economy, she indicated.
• The neutral rate is probably higher, but it is difficult to determine precisely, Hammack said.
• She reported hearing "early warning signs" of a potential issue with inflation expectations.
• There is a need to "cool the economy at the margins," she noted.
• Higher interest rates will not deter hyperscalers, but could influence firms in other sectors, according to Hammack.
• The current question for the Fed is the speed at which to make policy more restrictive.
• She does not want to endanger the jobs side of the Fed's mandate.
• Further restraint is necessary; if monetary policy remains passive, market conditions would shift, she said.

The remarks carry a hawkish tone. Hammack is framing the debate around the pace of tightening. Her concern about inflation expectations is central. If households and businesses begin to expect persistently higher inflation, bringing it back down would become more difficult.

She also acknowledges the trade-off. Lower-income workers are struggling to pay bills, and she aims to avoid threatening jobs. For traders, the comments lean toward tighter policy, but the speed remains unresolved. Her view that the neutral rate is likely higher also implies that current rates may provide less restraint than their level alone would suggest.