Recapping Fed’s Hammack – says inflation still trumps jobs on the Fed’s agenda

Fed’s Hammack warns inflation still top concern, says policy only ‘barely restrictive’

Cleveland Fed President Beth Hammack said inflation remains the Federal Reserve’s more pressing concern, arguing that monetary policy should stay “mildly restrictive” until price growth is firmly on track to the 2% target.

Speaking at the Economic Club of New York, Hammack said her view of the neutral rate — the policy rate that neither stimulates nor restrains the economy — suggests the current stance is “only barely restrictive, if that.” She based that assessment on recent economic data, market indicators, and model estimates.

Hammack said inflation has run above target for over four years, while the labour market remains healthy but softening, and projected that price growth will hover about one percentage point above target next year, taking two to three years to close the gap. She expects the jobless rate to rise slightly above its long-run level in 2026 before easing again.

During the Q&A, she described the U.S. economy as “robust and healthy”, adding she would not support cutting rates into accommodative territory given persistent inflation. She also highlighted that consumption remains concentrated among higher-income households, while price pressures are now “being felt higher up” the income scale.

Hammack defended Fed independence, calling it essential for making data-driven decisions free from political influence. On digital assets, she said stablecoins may have value for cross-border payments, though she sees little advantage over existing systems like FedNow for domestic use.

She also discussed AI’s structural impact, saying monetary policy is suited to cyclical, not structural, shifts — and that AI could spur both productivity gains and job dislocations.

Her remarks follow earlier comments from Fed Governor Michelle Bowman, who placed greater emphasis on slowing job growth rather than inflation, underscoring the divergent views among policymakers on the timing of future rate cuts.