December 20, 2024
Cleveland Fed President Beth Hammack stressed that the decision to cut interest rates was difficult and that she prefers to keep monetary policy steady for now. She noted that the US economy is in good shape, with strong growth, a healthy labor market, broad-based easing of financial conditions, and continued positive business sentiment.
Beth Hammack also stressed that monetary policy has played a major role in reducing inflation, especially personal consumption expenditures inflation, which has fallen significantly from its peak of 7.2% in the summer of 2022.
Despite these positive developments, Hammack stressed that inflation remains elevated, and that progress in returning inflation to the 2% target has been uneven. She explained that it is essential to maintain the focus on returning inflation to its target over the medium term, and that monetary policy should remain modestly tight for some time to achieve this goal.
The president of the US Federal Reserve Bank in Cleveland added that monetary policy has become close to a neutral position, but she prefers to keep policy steady until there is more evidence that inflation has resumed its path towards the desired goal.
In the context of the December 2024 decision, Hammack said she believed keeping the target range for the federal funds rate at 4.5% to 4.75% was the best choice given recent economic data and accommodative financial conditions, along with her expectation that inflation would remain slightly above 2% over the next year amid a strong labor market.
