Cleveland Federal Reserve President Beth Hammack said Wednesday that interest rates are not putting much restraint on the U.S. economy, while stressing that inflation remains too high.
Speaking at an event in Columbus, Ohio, Hammack said the labor market appears to be stabilizing and is finding a healthier balance. She flagged the persistence of elevated inflation as a central concern for policymakers.
On the appropriate policy stance, Hammack was explicit: "Right now, I think Fed should stay on hold here," she said, indicating a preference for maintaining the current level of interest rates while economic data are evaluated.
Hammack also highlighted trends in household spending, noting that consumer demand continues to hold up. She qualified that observation by saying the resilience in spending is being driven primarily by higher-income households.
The comments were delivered against the backdrop of ongoing internal deliberations at the central bank, as officials weigh fresh economic indicators to determine the timing for any potential adjustments to the policy rate.
Hammack's remarks underscore two clear themes: the limited apparent impact of current rates on slowing overall economic activity, and the Fed's continued concern about inflation that remains above desired levels. Her recommendation to remain on hold reflects a cautious approach that prioritizes further data over immediate moves.
Summary
Hammack said rates are not significantly restraining the economy, inflation is still too high, the labor market is stabilizing, and consumer spending remains robust largely because of higher-income households. She advised holding policy steady while policymakers evaluate incoming data.
Key points
- Interest rates are not currently exerting strong restraint on the U.S. economy.
- Inflation continues to be too high, prompting caution among Fed officials.
- Consumer spending is holding up, but the strength is concentrated in higher-income households.
Impacted sectors
- Consumer-facing industries, given remarks on spending patterns.
- Interest-rate-sensitive financial sectors, given the discussion of Fed policy stance.
Risks and uncertainties
- Persistent inflation remains a risk to price stability and monetary policy decisions.
- Current interest rates may be insufficient to cool economic activity, limiting policy effectiveness.
- Uneven consumer spending concentrated among higher-income households could pose distributional risks for aggregate demand.