Fed's Hammack: '2% Inflation Is Not In Sight'

The Federal Reserve is expected to maintain its current interest rate policy for the foreseeable future, according to Cleveland Fed President Beth Hammack, as policymakers continue to evaluate inflation trends and labor market conditions. Hammack emphasized patience on Thursday, stating that while progress has been made, inflation is not yet on track to consistently meet the 2% target.

What Happened: The Federal Reserve, following its latest policy discussions, signaled that interest rates are likely to remain unchanged for an extended period.

Hammack underscored that while the job market remains strong, inflation’s decline has been uneven, justifying a cautious approach before considering rate cuts, Reuters reports. “We have made good progress, but 2% inflation is not in sight just yet,” she said. The central bank’s benchmark rate currently stands between 4.25% and 4.5%.

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Hammack, who joined the Fed in August 2024, also suggested that monetary policy may already be near a neutral stance. “Policy does not strike me as being meaningfully restrictive; or, put differently, we may be close to a neutral setting already,” she noted.

While some policymakers believe inflation will gradually decline, she cautioned that economic uncertainties, including potential inflationary risks from trade and immigration policies, remain a concern, according to Reuters.

Why It Matters: The Fed’s stance on interest rates impacts borrowing costs, investment decisions, and overall economic stability. Despite the recent cooling of inflation, concerns remain about potential upward pressure stemming from geopolitical risks and policy shifts.

According to the minutes from the Federal Open Market Committee's (FOMC) January meeting, officials remain divided on how quickly rate cuts should be implemented. Policymakers stress the need for more data before making any adjustments.

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