The Fed’s Hammack would prefer tighter policy given too high inflation

Federal Reserve Bank of Cleveland President Beth Hammack said Friday that, given her own view of the economy, she would prefer monetary policy to be tighter than it currently is. The Fed’s rate cut this week, along with earlier easing this year, keeps interest rate policy “around a neutral” level, Hammack said at an event in Cincinnati. “I would prefer to take a slightly more restrictive position” to put more pressure on inflation levels that are too high, she said.

Hammack’s comments appear to suggest that had she voted at this week’s Federal Open Market Committee meeting, she would have opposed the decision to cut the central bank’s interest rate margin by a quarter of a percentage point to between 3.5% and 3.75%.The Fed cut rates to help support the labor market, hoping that still-high inflation levels will ease as the impact of President Donald Trump’s tariffs fades. Two Fed officials opposed the rate cut, while another wanted a bigger step down.

Before the Fed meeting, Hammack had shown strong skepticism about a rate cut given the still high level of inflation. In her remarks Friday, she flagged the challenge of making monetary policy in the current environment.

Hammack said the state of price pressure is a constant concern among her business contacts and that excessive price pressure stems from more than just tariff effects.

If inflation remains at higher levels for a little while longer, then that says to me that we may need to look at where we are from a policy perspective. We may not be restrictive enough, assuming the labor market holds up,” Hammack said. But “if the labor market weakens further, it will return to these challenging times” where the right balance must be found in setting monetary policy. After Wednesday’s Fed meeting, Chairman Jerome Powell said the current stance of monetary policy is “within a range of plausible neutral estimates.” He also said, “I don’t think a rate hike is anyone’s baseline because the following is anyone’s baseline scenario right now.”

Hammack will be a voting member of the FOMC next year.

In her remarks, Hammack also said she believes the central bank’s next leader will maintain the institution’s focus on containing price pressures.

With Powell’s term as leader coming up in May, Hammack said, “I am confident that a new chairman will also be focused on a 2% inflation target.”