Cleveland Fed president Hammack opposes recent rate cut, cites strong economy

Investing.com -- Federal Reserve Bank of Cleveland President, Beth Hammack, expressed her opposition to the central bank's recent rate cut, citing economic strength and the inflation outlook as reasons against easing policy. Hammack was the lone dissenting voice during the meeting that took place earlier this week.

Hammack's belief is that monetary policy is not far from a neutral stance, and she prefers to hold policy steady until there's further evidence that inflation is resuming its path to the Fed's 2% objective. She voiced this opinion in a statement released on Friday, as the quiet period around the most Federal Open Market Committee ended.

The Federal Reserve met expectations on Wednesday by cutting its federal funds target range by a quarter percentage point, to between 4.25% and 4.5%. The Fed also reduced the number of rate cuts it expects to carry out next year due to an expected increase in the levels of inflation.

Hammack's dissent is noteworthy as she only took office in August and has participated in just three FOMC meetings. Before joining the Cleveland Fed, Hammack had a long career in financial markets and recently gave her first policy speech, where she suggested a cautious approach towards monetary policy.

In her statement, Hammack also expressed her belief that interest rates are close to a neutral level where they would neither slow nor stimulate the economy. She suggested that rates should remain high enough to modestly restrict economic activity "for some time."

While she acknowledges that the economy is "in a good position," Hammack believes there's more work to do on easing price pressures. The Fed cut rates for a third consecutive time at its December 17-18 gathering, but Hammack thinks interest rates should be held steady until there's more progress in cooling inflation.

Hammack's dissent was the first by a regional bank president since 2022 and came after a similar move by Governor Michelle Bowman in September. Her career prior to joining the Fed spanned three decades at Goldman Sachs Group Inc (NYSE:GS )., covering finance, capital markets, and risk management.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Source: Investing.com