Fed’s Hammack: Inflation risks outweigh job market concerns

Investing.com -- Federal Reserve Bank of Cleveland President Beth Hammack said Monday that inflation risks outweigh concerns about job market fragility, signaling support for maintaining higher interest rates.

Speaking at a European Central Bank conference, Hammack stated that inflation "continues to be the bigger concern" regarding the Fed’s dual mandate and that price pressures are "headed in the wrong direction."

"I think we need to maintain a restrictive stance of policy to ensure that we can bring inflation back to our target," Hammack said, indicating opposition to further interest rate cuts by the central bank.

Hammack identified tariffs as "a big part of the inflation story" and expressed particular concern about elevated services inflation. She noted that the current economic environment is "challenging for the Fed," as it faces pressure on both its employment and price stability mandates.

Despite seeing "fragility in job market data" and acknowledging that "something is changing in the labor market," Hammack characterized the current employment situation as a "low hiring, low firing environment."

Looking ahead, Hammack projected that inflation would return to the Fed’s 2% target by 2027. She emphasized the importance of keeping inflation expectations in check, noting that while expectations remain anchored, "there are some signs of worry."

Hammack pledged to remain "open minded about the economy’s performance" but reiterated that "restrictive monetary policy" is necessary to cool inflation pressures.

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