Cleveland Fed President Beth Hammack's Policy Outlook

By Michael S. Derby
(Reuters) – In her first major policy speech, Federal Reserve Bank of Cleveland President Beth Hammack stated she is keeping her options open for the central bank's upcoming meeting due to broader economic conditions suggesting a slowdown in rate cuts.

> “I believe we are at or near the point where it makes sense to slow the pace of rate reductions,” Hammack said. “Moving slowly will allow us to calibrate policy to the appropriately restrictive level over time given the underlying strength in the economy.”

Regarding the Federal Open Market Committee meeting on December 17-18, Hammack mentioned that more data will arrive before then, emphasizing her intent to maintain an open mind about adjusting the federal funds rate, which currently stands between 4.5% and 4.75%.

Hammack indicated that as of yesterday, financial markets anticipated one rate cut before the end of January, with a few more expected by late 2025. “This path aligns with my current expectations for the funds rate, based on forecasts of solid economic growth, low unemployment, and gradual inflation improvements,” she stated.

After taking charge of the Cleveland Fed in August, Hammack addressed robust November hiring data and insights from other central bank officials. Markets are considering a potential quarter-point rate cut at the upcoming meeting, though uncertainty looms beyond that.

In her remarks, Hammack indicated that maintaining a restrictive monetary policy is sensible in light of the economy's current condition. While acknowledging that estimating the exact level of restraint is challenging, she suggested that “resilient growth, a healthy labor market, and still-elevated inflation” support a modestly restrictive monetary policy for the foreseeable future.

Maintaining economic restraint should aid in lowering inflation that remains above the Fed’s 2% target.