Federal Reserve Bank of Cleveland President Beth Hammack prefers getting inflation down to 2% through more frequent smaller adjustments, which would be less disruptive.
Hammack was speaking as part of a panel titled Stable Coins and the Demand and Price (Exchange Rate) of "Safe Haven" Currencies at the Karl Brunner Institute of Macroeconomic Policy's SNB and Its Watchers conference in Zurich, Switzerland.
"Inflation has now been above our goal for nearly six years, and the pressures I'm seeing appear to be relatively broad-based, reflecting both supply and demand," said the Cleveland Fed prez. "I expect that monetary policy will need to move to a restrictive stance to bring inflation back to 2% in a timely manner."
"I prefer getting to that stance through more frequent smaller adjustments when possible, something which would be less disruptive to households, businesses, and financial markets. This strategy would also reduce the risk of having policy fall behind where it needs to be and an inflationary mindset take hold."
"The value of the dollar is one of many factors affecting prices and, overall, the economy," she said on the role of the Fed in the talk about the dollar. "The Fed also has responsibility for monitoring and promoting financial stability, and the dollar is an important piece in the interconnected global financial system."
"Delivering on our commitments is an important way the Fed helps the dollar remain a reliable store of value," she said. "This includes bringing inflation back to our 2% goal, sustaining a healthy labor market, and supporting a resilient financial system. High inflation erodes the purchasing power of dollar cash holdings and nominal bonds."
"The Fed's independence, along with its accountability to Congress, is critical to maintaining the world's confidence in our commitment to 2% inflation," said the Federal open market Committee's voting member. "Losing any one of these benefits could diminish the dollar’s status as a reserve currency."
"Some suggest that digital currencies, including cryptocurrencies, provide an attractive alternative to holding dollars. While they do offer some novel payment methods, I have yet to see compelling evidence of broad use cases for them as a medium of exchange," said Hammack.
"The price volatility of cryptocurrencies makes them a less certain store of value than the dollar," she said, adding that stablecoins may tell a different story.
"Thus far, nearly all of the stablecoins outstanding are pegged to the dollar," she said, highlighting that stablecoins are extending the dollar's reach into new corners of the global financial system.
