Fed's Hammack Says Policy Restriction Still Needed

Cleveland Fed President Beth Hammack emphasized in public remarks on Thursday that, despite the U.S. labor market having come into better balance, current monetary policy still needs to maintain a restrictive stance. This statement highlights the Fed's internal caution against prematurely easing tightening policy, with the core concern remaining whether inflation can sustainably decline.

**Inflation Pressures Remain the Core Concern**

Hammack noted that inflation has remained above the Fed's 2% target for several consecutive years, and has recently stayed near 3%. She warned that if inflation persists at elevated levels for a longer period, it could signal that current policy is not tight enough. According to market reports, she leans toward keeping rates at a more restrictive level to avoid prematurely easing, which could allow inflation to remain above target for longer. This stance indicates that policymakers prioritize price stability far above short-term economic stimulus.

**Policy Path Depends on the Labor Market**

When discussing future policy direction, Hammack identified labor market conditions as a key variable. She stated that if the labor market remains solid, the Fed may need to reassess its current policy stance, or even adopt more restrictive measures. However, she added that if the labor market weakens further, the Fed would face a difficult moment in balancing its dual mandate. This "data-dependent" stance leaves flexibility for future policy adjustments.

**Confidence in the Fed's Policy Goals**

Hammack also expressed confidence in the continuity of Fed policy. She believes that the next Fed chair will continue to prioritize controlling inflation, with a focus on the 2% inflation target. This statement aims to stabilize market expectations, indicating that regardless of future personnel changes, the Fed's long-term commitment to fighting inflation will not waver.