Cleveland Federal Reserve President Beth Hammack said on Thursday that U.S. monetary policy will need to turn restrictive to bring inflation back to 2%, and that she would rather get there through smaller, more frequent rate increases than in large jumps. She pointed to September data showing headline inflation, by the Fed's preferred PCE gauge, at 3.6%.

For investors in Asia, the message keeps a December rate hike on the table just as markets were starting to doubt it. A higher U.S. policy rate tends to support the dollar and Treasury yields, which feeds directly into funding costs and currency pressure across the region, a link Capital Times traced in its coverage of how Treasury yields and the dollar move Asian currencies.

Hammack spoke at the SNB and Its Watchers conference in Zurich, in remarks the Cleveland Fed published on its website. She was one of two policymakers who dissented last week when the Federal Open Market Committee held its benchmark rate at 3.75% to 4% in a 10-2 vote. According to the Fed's statement, she and Governor Lisa Cook preferred a quarter-point increase.

Hammack: inflation has moved "in the wrong direction"

In her prepared text, Hammack said inflation had worsened since she last addressed the topic in March. Core PCE inflation, which strips out food and energy, was 3.1% in September. Both readings, she said, sit well above the Fed's target and are higher than at the start of the year.

She added that inflation has now exceeded the 2% goal for nearly six years and that the pressures she sees look broad, coming from both supply and demand.

Hammack did not say when the Fed should move next. Her argument was about pace. Frequent, modest adjustments would be less disruptive to households, businesses and markets, she said, and would lower the risk that policy falls behind and that an inflationary mindset takes hold among the public. She also said the Fed's independence, combined with its accountability to Congress, is critical to global confidence in its 2% commitment.

Richmond Fed President Thomas Barkin, speaking separately in Charlotte, North Carolina, on Thursday, called inflation too high and said gradual rate increases made sense, Reuters reported.

The two speeches matter more than usual because Chair Kevin Warsh has declined to give forward guidance on the rate path, leaving markets to read the committee through individual officials.

December odds ease even as hawks speak up

Markets moved the other way during the day. Futures traders priced roughly a 70% chance of a hike at the Dec. 8-9 meeting, down from more than 80% on Wednesday, according to Reuters. A sharp sell-off in technology shares weighed on risk appetite on Thursday.

Analysts remain split on how far the Fed will go. Evercore ISI sees one more increase as narrowly favored, while TD Securities expects half a percentage point of hikes by early next year, Reuters reported. The Fed raised rates in September and has held since. Hammack also dissented in late July, when the committee left rates unchanged.

Reuters cited tariffs, the war in the Middle East and heavy spending on artificial intelligence as forces keeping price pressures elevated.

The dollar's reserve role, and stablecoins

Most of Hammack's speech dealt with the dollar's standing as a reserve currency, a topic of direct interest to Asian central banks that hold large dollar reserves. She said the dollar's share of global foreign-exchange reserves had fallen to about 57% as of mid-2026, from nearly 72% in the early 2000s. It may have peaked, she said, but she found it hard to picture any imminent major shift in its global role.

She noted that nearly 90% of the US$9.6 trillion in daily currency trading involves the dollar, against 30% for the euro. The Swiss franc, despite its safe-haven reputation, accounts for only about a quarter of 1% of central bank reserves, which she attributed to the small size of Switzerland's economy and bond market.

Hammack said she was skeptical that cryptocurrencies threaten the dollar, given their price swings. Stablecoins were a different matter. Nearly all of those outstanding are pegged to the dollar, and studies suggest inflows into them could push down Treasury bill yields if the market grows large, she said. She added that it was unclear whether the GENIUS Act, the U.S. stablecoin law signed in July 2025, would raise overall global demand for dollars, since overseas holders may struggle to use its redemption rights.

The next test for the hawks' case is the October U.S. jobs report on Friday. The report is expected to show about 65,000 jobs added, after 29,000 in September, with unemployment forecast at 4.2%, according to Reuters.