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High energy could bring inflation but could also weigh on growth
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Rates are in a good place, baseline is staying on hold for while
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Risks go in both ways for monetary policy
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The job market is reasonably in balance
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Fed has been missing inflation target for five years
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Consumers have been facing extended period of elevated inflation
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Fed is still persistently missing on inflation target
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There are are risks Fed could go either way with interest rate target
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Supply shocks are tricky for monetary policy
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Doesn’t see job market as source of inflationary pressure
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Inflation expectations look reasonably well contained
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It is a “tough time” for Fed policy making
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It’s not clear right now what AI will do to economy
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Fed independence is really important
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Amid threats to Fed, focused on doing job
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Looking forward to further debates on balance sheet
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Reserve demand issues are key to Fed balance sheet size
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It’s a balancing act on how to manage Fed balance sheet
The market is pricing in about 10 bps of Fed easing before year end and Cleveland Fed President Beth Hammack sounded fine with that. She signaled a cautious, data-dependent stance on monetary policy, highlighting that interest rates are likely to remain at their current levels for the foreseeable future. Acknowledging that the Federal Reserve has struggled to hit its 2% inflation target for five years, Hammack noted that while inflation expectations appear contained, consumers continue to grapple with a prolonged period of high prices.
Her comments underscore a “balanced” approach to the dual mandate: the labor market is no longer a primary driver of inflation, yet supply shocks and energy prices present ongoing risks to growth. Hammack emphasized that policy making remains “tough” amid these uncertainties, including the unknown economic impact of AI
