Federal Reserve Bank of Cleveland President Beth Hammack said higher government bond yields mainly reflected rising real rates, a solid economic outlook, strong technology-sector investment competing for investor funds and repricing tied to the monetary policy outlook rather than increased inflation expectations. She warned that inflation above the Federal Reserve’s 2% target for more than five years could normalize elevated prices and change business and household behavior. The personal consumption expenditures price index rose 3.7% in July from a year earlier. Hammack said policy remains insufficiently restrictive and should stay tight until there is clear progress toward price stability, although she did not specify her preferred next rate move. The Fed raised its target range by a quarter percentage point earlier this month to 3.75%-4%, officials indicated another increase before year-end, and markets expect the Fed to hike by more than that. Hammack attributed persistent inflation to strong demand tied to the solid economy and stable job market, as well as shocks including trade tariffs and energy effects from the Iran war. She said inflation expectations remain reasonably anchored, but warned that prolonged above-target inflation could shape public sentiment and economic behavior.