By Michael S. Derby
NEW YORK, Dec 12 (Reuters) – Federal Reserve Bank of Cleveland President Beth Hammack said Friday that given her own take on the economy she would prefer monetary policy to be tighter than it is currently.
The Fed’s rate cut this week along with past easings this year has interest rate policy “right around a neutral” level, Hammack said at an event in Cincinnati. “I would prefer to be on a slightly more restrictive stance” to help put more pressure on inflation levels that are too high, she said.
Hammack’s comments appear to suggest that had she had a vote at this week’s interest rate setting Federal Open Market Committee meeting, she would have opposed the decision to cut the central bank’s interest rate target range by a quarter percentage point to between 3.5% and 3.75%.
The Fed cut rates to help support the job market amid hopes that still high inflation levels will moderate as the impact from President Donald Trump’s tariffs dissipate. Two Fed officials opposed the rate cut, while another wanted a larger move down.
Ahead of the Fed meeting Hammack had signaled strong skepticism over cutting rates 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 pressures is a constant concern among her business contacts and that too-high price pressures appear to be from more than just tariff impacts.
If inflation stays at higher levels “for a bit longer, then that’s going to say to me, maybe we need to look at where we are from a policy perspective. Maybe we’re not restrictive enough, assuming the labor market holds up,” Hammack said. But, “if the labor market weakens further, then it just gets to be back in this challenging time” of having to find the right balance in setting monetary policy.
Speaking after the Fed meeting on Wednesday, Chair Jerome Powell said the current stance of monetary policy is “within a range of plausible estimates of neutral.” He also said, “I don’t think that a rate hike is anybody’s base as the next thing — is anybody’s base case at this point.”
Hammack will be a voting member of the FOMC next year.
In her remarks, Hammack also said she believes the next central bank leader will retain the institution’s focus on keeping price pressures contained.
With Powell’s term as leader up next May, Hammack said “I have every confidence that a new chair coming in will also be focused on a 2% inflation objective.”
(Reporting by Michael S. Derby; Editing by Chizu Nomiyama )
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