Federal Reserve Employee Disagrees with Interest Rate Decision: "Still Much Work on Inflation

Beth Hammack, a solitary figure in the decision-making body of the US Federal Reserve, recently opposed the interest rate cut, as she believes that "more work needs to be done on inflation." In a statement on Friday, the President of the Cleveland Fed made it clear that she would prefer to pause interest rate adjustments due to the strong US economy. Hammack stated that in her assessment, monetary policy is currently not far from a neutral course and she would therefore prefer to wait until there is further evidence that inflation returns to the 2-percent path. Although the decision was a "close call" for her, she shares the view that monetary policy should remain slightly restrictive. This was Hammack's second vote against the Fed since the onset of interest rate cuts in September. Previously, Fed Governor Michelle Bowman agreed this week to a cut of 25 basis points. The US Federal Reserve also reduced the number of expected rate cuts for 2025 from four to two this week, prompted by concerns about the persistence of inflation. Current inflation data showed that price increases in November slightly declined compared to the previous month, but not significantly enough to bring inflation to the target level of two percent. The core PCE inflation, a closely watched Fed indicator, rose by 0.1 percent in November compared to the previous month, falling short of economists' expectations. Hammack emphasized that monetary policy has played a crucial role in significantly reducing PCE inflation from its peak of 7.2 percent in summer 2022. Nevertheless, inflation remains high and progress uneven, which is why she wants the Fed to act promptly to reduce inflation to two percent.