Fed’s Hammack backs rate hike path as inflation stays stubborn
Where are mortgage rates headed next? Selma Hepp, chief economist at Cotality, says the base case still points to lower mortgage rates over time, but inflation, bond yields, and geopolitical uncertainty continue to create significant volatility. https://t.co/FHN37YJIKP
— Mortgage Professional America Magazine (@MPAMagazineUS) October 8, 2026
The specter of an inflationary mindset
Hammack’s warning concerned the risk of an inflationary mindset becoming entrenched. A District retailer, she said, told her they planned to raise prices beyond their current input cost increases, effectively front-running supply shocks that had not yet arrived.
“With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy,” she said, adding that long-run expectations remain anchored but should not be taken for granted after more than five years of above-target inflation.
Samantha Shelton, mortgage broker and president of Align Lending, told Mortgage Professional America ahead of the Fed’s July meeting that a rate hike “wouldn’t surprise me if there was a little bit of a hike due to renewed inflation concerns, tied to energy prices and the Fed’s desire to reinforce its commitment to price stability.”
For brokers advising rate-sensitive clients, conditions are unlikely to loosen quickly. According to CME Group’s FedWatch tool, traders were pricing in approximately a 78% chance the Fed holds at its next meeting, while nearly 88% expected a hike at December’s gathering.
Wall Street institutions have raised concerns about multiple further Fed hikes as the inflation outlook worsens. With unemployment steady at 4.2% and GDP growth running solidly through mid-year, Hammack signaled little appetite to ease off.
