Cleveland Fed President Hammack, who opposed the Fed's interest rate cut, makes a statement

Federal Reserve Bank of Cleveland President Beth Hammack stated that she voted against the interest rate cut at the Bank's recent meeting because she believes more evidence is needed to show that inflation is falling.

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Cleveland Fed President Hammack, who opposed the Fed's interest rate cut, makes a statement

In a written statement, Hammack noted that the U.S. economy is in a good position, but there is more work to be done regarding inflation.

Pointing out that economic growth is strong and the labor market is healthy, Hammack stated that general measures of financial conditions have eased and business confidence remains strong.

Despite the positive developments, Hammack drew attention to the fact that inflation remains high, stating that recent progress in reducing inflation to 2 percent has been uneven.

Emphasizing that it is important to focus on bringing inflation down to 2 percent in a timely manner given the health of the labor market, Hammack assessed, "I believe that monetary policy will need to remain moderately restrictive for some time to achieve this goal."

Hammack stated, "Based on my estimate that monetary policy is not too far from a neutral stance, I prefer to keep the policy rate unchanged until I see more evidence that inflation is moving toward our 2 percent target."

Explaining that she believed keeping the interest rate unchanged at the December meeting was the best choice due to the strength of recent economic data, supportive financial conditions, and her forecast that inflation would remain slightly above 2 percent throughout next year in a healthy labor market environment, Hammack reported that the momentum in the economy and recent high inflation data caused her to revise her inflation forecasts for next year upward.

Hammack expressed that inflation remaining above 2 percent for too long could lead to a deterioration in inflation expectations and make it more difficult to return inflation to the target.

The Fed lowered the policy rate by 25 basis points to the 4.25-4.50 percent range, in line with expectations, at its final meeting of the year held on December 17-18.

The decision was made with an 11-to-1 vote. Hammack, who was in favor of keeping the policy rate unchanged, cast the dissenting vote.

News Source: AA