Fed’s Hammack Says Inflation Too High, Must Be Cautious Easing
Federal Reserve Bank of Cleveland President Beth Hammack said she remains laser-focused on inflation and officials should be cautious about interest-rate cuts to avoid overheating the economy.
Hammack said there are signs the labor market is still robust despite a recent slowdown in job growth, including low layoffs and a low unemployment rate. Inflation, meanwhile, has been above the Fed’s 2% target for more than four years and may not return to the central bank’s goal for another couple of years, she said.
“I think that we should be very cautious in removing monetary policy restriction,” Hammack said Monday during a moderated discussion at the Cleveland Fed. “It worries me that if we remove that restriction from the economy, things could start overheating again.”
Fed officials are debating how much further to lower borrowing costs this year after cutting interest rates last week by a quarter percentage point, the first reduction since December. Some policymakers are becoming more concerned about growing risks to the labor market, while others remain primarily worried about the possibility that above-target inflation could be pushed higher by tariffs and other policies.
Hammack said policy is only “very mildly” restrictive after last week’s rate cut, leaving rates a short distance from the neutral level that neither stimulates nor slows growth.
“I feel like the labor side is still in a pretty good shape, and I’m really worried about what’s going on with inflation,” she said.
Hammack said earlier this month that she did not see a case for lowering interest rates in September, given inflation was running above the Fed’s 2% target and at risk of moving higher. The Cleveland Fed chief does not vote in policy decisions this year but will have a vote in 2026.
Source : Bloomberg.com
