On Thursday, November 20, Beth Hammack, the President of the Federal Reserve Bank of Cleveland, stated that given the lingering high inflationary pressure, the current interest rate policy must remain restrictive to ensure that inflation continues its downward trajectory towards the Federal Reserve’s 2% target. She admitted that the current environment poses significant challenges for monetary policymakers.
During a speech at the Pittsburgh Economic Club, Hammack described the current situation as a “challenging period for monetary policy” due to both inflation and employment facing difficulties.
She stated, “Considering both factors, I believe we need to maintain a certain level of tightening policy to continue exerting pressure and bring the inflation rate down to our target level.”
Hammack highlighted that while the U.S. economy has shown resilience, feedback from businesses and consumers indicates that price pressures remain excessively high and are moving in the wrong direction, especially with inflation in the services sector causing her “particular concern.” She suggested that some price pressures may be influenced by tariffs.
She projected that tariffs would continue to drive inflation upwards before 2026. She noted that the current unemployment rate is approaching its highest level in nearly four years, indicating that the job market appears balanced, but signs of weakness are worrisome.
During the government shutdown, delayed releases of certain official data have increased policy uncertainty. Hammack stated that the Federal Reserve relies on business interviews and market feedback to compensate for information gaps.
She emphasized the importance of the Federal Reserve’s independence in achieving its mission of inflation and employment, stating that “political factors do not play a role in monetary policy decisions.”
Regarding the artificial intelligence (AI) boom, she commented, “It’s too early to predict the future now… Time will tell if the valuations of AI companies are reasonable.”