Beth Hammack, president of the Federal Reserve Bank of Cleveland, said interest rate hikes could be on hold while officials evaluate incoming economic data.
Cleveland Federal Reserve President Beth Hammack (Reuters)”Instead of trying to fix the funds rate, I would prefer to err on the side of patience as we assess the impact of recent rate cuts and monitor how the economy performs,” Hammack said in prepared remarks to an event in Columbus, Ohio, on Tuesday. “Based on my forecast, we could be stuck for quite some time.”
The Cleveland Fed chief has repeatedly urged his peers on the Federal Open Market Committee to be cautious about cutting rates to avoid higher inflation. He backed last month’s decision to keep interest rates steady after three consecutive cuts until the end of 2025.
Hammock shared a “cautiously optimistic” view, saying economic growth should be boosted by fiscal support, low interest rates and other factors — a shift that should strengthen the labor market. He said he expects inflation to come down this year.
Fed officials were relieved by soft inflation readings and data suggesting some stability in the unemployment rate, but new data expected this week could test those assessments. January jobs data, which was delayed by the recent government shutdown, will be released on Wednesday, and the next consumer price index report is scheduled for Friday.
Retail sales were weaker than expected in December, with eight of 13 categories posting declines, according to data released by the Commerce Department last Tuesday.
Hammack stressed that officials need to be flexible with their response if the economy does not behave as expected, and he expressed openness to raising interest rates if necessary.
“At this point, I see the risks to a higher or lower path for the funds rate as balanced,” he said. “History shows us flexibility has advantages.”
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