11.08.202609:05 Forex Analysis & Reviews: Cleveland Fed Chief: Rates Do Not Restrain the Economy, and Inflation Will Not Return to the Target on Its Own

The dollar rose after Cleveland Federal Reserve Bank President Beth Hammack said that several interest-rate increases might be required to bring inflation back to the Fed's 2 percent target. Still, she refused to name the end point of that cycle in advance. "I would say, broadly, that a single 25-basis-point move is unlikely to do much for the economy," Hammack said on Monday in an interview. According to her, it is likely a matter of some number of increases, but she does not want to predetermine in advance exactly what that number will be.

Hammack's position was not unexpected given her recent vote. She was one of three Fed representatives who opposed the decision to leave the rate unchanged and insisted on raising it. In a statement after that meeting, the Cleveland Fed chief emphasized that the longer high inflation persists, the harder it becomes to bring it back to normal levels, and that logic underlies her current assessments.

In Monday's interview, Hammack outlined two principal theses explaining her hawkish stance. First, in her view, the current level of rates does not materially restrain the economy — that is, monetary policy is not truly restrictive despite the seemingly high nominal level. Second, she does not see signs that inflation will return to the target on its own, without additional intervention by the central bank.

This formulation has practical significance for the market. Hammack is effectively signaling that she is considering not a one-off adjustment but a full tightening cycle, while consciously avoiding specifics about its scale. Her refusal to name an endpoint is consistent with the overall communication line of the current Fed leadership under Kevin Warsh, which has abandoned the practice of giving direct signals to the market about future rate trajectories. Hammack's position remains one of the most hawkish voices within the regulator and directly opposes the part of the committee that, after a recent weak jobs report, is increasingly leaning toward possible policy easing by year-end.

As I noted above, all this supported the US dollar against risk assets, which helped partially offset the losses recorded at the end of last week.

As for the current technical picture of EUR/USD, buyers now need to consider how to take the 1.1555 level. Only that will allow aiming for a test of 1.1580. From there, one can already climb to 1.1620, but doing so without support from large players will be rather problematic. If the instrument falls only to around 1.1530, I expect some serious action from major buyers. If there is no one there, it would be better to wait for a refresh of the 1.1515 low or to open long positions from 1.1502.

As for the current technical picture of GBP/USD, pound buyers need to take the nearest resistance at 1.3525. Only that will allow targeting 1.3555, above which it will be rather difficult to break through. The farthest target will be the 1.3580 area. In the event of a decline, bears will try to seize control of 1.3490. If they succeed, a range breakout will deal a serious blow to bulls' positions and push GBP/USD down to a low of 1.3464 with the prospect of extending to 1.3435.