Is an October rate hike a done deal? "Hawkish wind" sweeps the Fed: three officials warn of inflation risks on the same day.

Since the Federal Reserve implemented its first rate hike in three years recently, multiple officials have called for further policy tightening. On Friday alone, three Fed officials signaled a hawkish stance, warning about inflation risks. Cleveland Fed President Beth Hammack said on Friday that she worries persistently high inflation could lead the American public to gradually view high prices as the norm, and the Fed must not let that happen. Speaking at an event hosted by her regional Fed bank, Hammack said that with inflation above target for more than five years, "the biggest risk to inflation right now is that an inflation mentality could begin to take hold." She added that the Fed needs to do its part, "We need to ensure policy is in a restrictive stance to help bring inflation back to target." Hammack said economic growth remains solid and the job market is stable. She expressed concern about demand-related inflation pressures and noted that capital spending will put pressure on inflation for some time. Hammack warned that if progress in lowering inflation stalls, inflation expectations could shift. She also said many long-standing questions remain about how artificial intelligence will affect inflation. Hammack did not explicitly state in her remarks what action she wants the Fed to take on rates, but she has consistently been a strong supporter of rate hikes to push down inflation. Relative to the Fed's 2% inflation target, the U.S. personal consumption expenditures (PCE) price index rose 3.7% year over year in July, and core inflation is also above the Fed's target. The Fed raised rates earlier this month, lifting the target rate range by 25 basis points to between 3.75% and 4%. Officials expect another rate hike before the end of the year, though market participants expect the Fed to raise rates by more than that. On the same day, Kansas City Fed President Jeffrey Schmid said inflation remains above the Fed's 2% target and policymakers have not fully resolved the inflation problem. "We still haven't solved inflation," Schmid said Friday while participating in a discussion in Kansas City. "Inflation has been above target for more than five years." On the issue of government debt, Schmid noted that U.S. debt appears "very extreme," hinting at long-term fiscal risks. When asked about AI, Schmid questioned whether the AI ecosystem is becoming "too big to fail." Schmid does not have a monetary policy vote this year, but he has previously expressed support for the Fed's rate hike this month. Meanwhile, New York Fed President John Williams on Friday again emphasized the severe inflation situation and warned that the Fed cannot ignore persistent supply shocks as it works to bring inflation back to its 2% target. Williams said the labor market is currently not a source of inflation pressure, and noted that tariffs by themselves typically do not cause sustained inflation. More concerning is that repeated supply shocks could keep pushing prices higher, making it harder for inflation to return to target. A day earlier, Williams said the Fed may need to raise rates again this year to ease inflation risks. He believes inflation remains a challenge and that it needs to be brought back to target in a timely manner. Philadelphia Fed President Anna Paulson also said last Thursday that if the economy evolves as expected, the Fed may need to raise rates further to push inflation back to its 2% target. According to CME's "FedWatch," the probability that the Fed will keep rates unchanged at 3.75%-4.00% at its October meeting is currently 35.8%, while the probability of a 25-basis-point hike is 64.2%. This article is reprinted from "Cailian Press," author: Bian Chun; GMTEight editor: Xu Wenqiang.