Cleveland Fed President Beth Hammack said in her first major policy speech that she will keep her options open when it comes to the central bank’s next monetary policy meeting while broader economic conditions continue to call for a slower pace of interest rate cuts.
Hammack added in the text of a speech she prepared to deliver to the Cleveland City Club: “I think we have reached the point where it makes sense to slow down the pace of lowering interest rates.
“Moving slowly will allow us to calibrate policy to the appropriate restrictive level over time in light of the underlying strength in the economy,” she added.
Regarding what will happen at the Federal Open Market Committee meeting scheduled for December 17-18, Hammack said that more data will come between now and then, noting that she will “keep an open mind” about how the federal funds rate, which is set. It is currently set between 4.5% and 4.75%.
Hammack noted that as of yesterday, financial markets were anticipating one rate cut between now and the end of January and “a few” additional easings by the end of 2025.
“This path is consistent with my current funds rate expectations, based on my outlook of strong economic growth, a low unemployment rate and a gradual improvement in inflation,” she said.
Hammack, who took over the leadership of the Cleveland Fed in August after a long career in financial markets, spoke in the wake of strong November employment data and comments from other central bank officials.
Financial markets are looking forward to a quarter-point cut in interest rates at the next meeting, but there is extreme uncertainty about what might come next.
In her statements, Hammack said that maintaining restrictive monetary policy makes sense in light of the current state of the economy.
Although she noted that the level of restraint is difficult to estimate, “resilient growth, a healthy labor market, and still high inflation suggest that it is appropriate to maintain a modest restrictive stance on monetary policy for some time.”
Maintaining some restraint in the economy would help bring inflation, which is still very high, back to the 2% level the Fed is targeting.
