Cleveland Fed President Beth Hammack said Thursday that she believes the central bank may be nearing the end of its short-term rate cutting cycle.
The policymaker told CNBC that he believes current interest rate levels have “little, if any, constraint” on the economic impact.
Restraint is a key metric for Fed officials, who are ideologically divided over whether the labor market downturn or inflation is the bigger threat. Hammack is more in the hawkish camp when it comes to inflation, favoring higher interest rates and more restrictive policies as a bulwark against further price spikes.
“I think we need to maintain a modest, somewhat restrained policy stance to ensure that we continue to get inflation back to our 2% target,” he told CNBC’s Steve Reisman’s “Squawk on the Streets.” “For me, monetary policy is hardly, if ever, restrictive at this point. I think we definitely need to maintain a somewhat restrictive stance for monetary policy to be implemented properly.”
Hammack added that the current federal funds rate is targeted at a range of 3.75% to 4%, which he believes is “right around the neutral rate,” suggesting there is no need to lower it any further.
Hammack will become a voting member of the Federal Open Market Committee next year.
The Fed’s next meeting will be Dec. 9-10, and market expectations have changed from almost certain that the Fed will approve a third consecutive quarterly rate cut to now pricing in a roughly 60% chance that the Fed will acquiesce, according to CME Group’s FedWatch futures price tracker. Minutes from the October meeting released Wednesday detail sharp disagreements among commissioners.
While focusing on inflation, Hammack expressed concern about current price levels, noting that interviews she and her staff conducted in the Cleveland area show that labor market pressures and inflation concerns are making it difficult for households to make ends meet.
“What we hear from workers is that if you have a job, you hang on to it for life,” she said. “We’re in this slow, low-hiring, low-firing environment. But what I’m hearing is… the money coming in is not growing as much as it used to. What used to be $30 is now $50, so… that inflationary pressure is still very noticeable for them.”
Hammack said the situation was “mixed” in Thursday’s September nonfarm payrolls report, which showed both stronger-than-expected payroll growth and an increase in the unemployment rate.
Correction: Cleveland Fed President Beth Hammack will be a member of next year’s FOMC. An earlier version of this article incorrectly stated when she would serve on the rate-setting committee. The article also misstated the numbers. Hammack said, “What used to be $30 is now $50…”
