Cleveland Fed President Hammack Does Not Support Recent Rate Cut, Citing Strong Economy

Cleveland Federal Reserve Bank President Beth Hammack expressed her opposition to the central bank's recent rate cut, citing economic strength and inflation outlook as reasons. Hammack was the only dissenting voice at the meeting that took place earlier this week.

Her belief is that the monetary policy is not far from a neutral stance and that she prefers to keep the policy unchanged until there is further evidence that inflation is progressing toward the Fed's 2% target. She voiced this view in a statement released on Friday, following the quiet period surrounding the latest Federal Open Market Committee meeting.

The Federal Reserve lowered the federal funds target range by a quarter point to a range of 4.25% to 4.5% on Wednesday, meeting expectations. The Fed also reduced the number of interest rate cuts it plans to make next year due to an anticipated rise in inflation levels.

Hammack's dissent is noteworthy as she started her position in August and has participated in only three FOMC meetings. Before joining the Cleveland Fed, Hammack had a long career in the financial markets and recently suggested a cautious approach to monetary policy in her inaugural policy speech.

In her statement, Hammack also indicated that she believes interest rates are near a neutral level that will not stifle or invigorate the economy. She suggested that rates need to remain high enough to "slightly restrict" economic activity for "a while."

While acknowledging that the economy is in a "good position," Hammack believes more effort is needed to alleviate price pressures. The Fed made its third consecutive rate cut at the December 17-18 meeting, but Hammack thinks rates should remain unchanged until more progress is made in cooling inflation.

Hammack's dissent marks the first opposition from a regional bank president since 2022 and follows a similar move by Governor Michelle Bowman in September. Before joining the Fed, her career spanned over 30 years at Goldman Sachs Group Inc., covering finance, capital markets, and risk management.