Fed’s Hammack opposes further rate cuts amid inflation concerns

Investing.com -- Cleveland Federal Reserve President Beth Hammack expressed opposition to additional interest rate cuts on Thursday, citing persistent high inflation as a primary concern.

"I remain concerned about high inflation and believe policy should be leaning against it," Hammack said in a speech to the Economic Club of New York. She described current monetary policy as "barely restrictive, if at all," adding it’s "not obvious to me that monetary policy should do more at this time."

Hammack opposed the Fed’s decision last week to cut its benchmark interest rate by a quarter percentage point to the 3.75%-4.00% range. While many Fed policymakers have grown concerned about potential weakness in the job market, Hammack emphasized that inflation remains above the central bank’s 2% target.

She projected inflation would stand at 3% by year-end and remain elevated through 2026 before gradually returning to target levels. This suggests the Fed may be on track for a decade of exceeding its inflation target.

Regarding employment, Hammack acknowledged some labor market concerns but maintained a relatively positive outlook. "Based on the slowing labor market, I expect the unemployment rate will tick up in coming months, ending this year just above its longer-run value," she said, while adding she does "not currently put high odds on a labor market downturn."

Hammack noted that financial conditions remain "quite accommodative, reflecting recent gains in equity prices and easy credit conditions," which should support economic growth next year.

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