Cleveland Federal Reserve President Beth Hammack said on Monday she hopes the Fed can bring inflation down without damaging the job market — but acknowledged that doing so may require cooling the blistering pace of corporate investment or the market-driven wealth gains fueling consumer spending.
“I hear more that the economy is booming than I hear that people are looking to pull back,” Hammack said in a Reuters interview, recounting conversations with business leaders. “I like growth… I’m not trying to stop growth. I’m just trying to pull it back a little bit so that it’s moving at a pace that doesn’t put too much pricing pressure out there.” She said those demand drivers are helping sustain inflation in the 2.5%-to-3.0% range, above the Fed’s 2% target.
More restriction, but how fast?
Hammack said she feels interest rates need to move higher to restrain demand, but added she would arrive at the Fed’s October 27-28 meeting with an “open mind” about whether to lift rates then, following September’s hike. She is a voter on rate policy this year and dissented in July in favor of a hike; investors currently expect the Fed to stay on hold in October.
“I think we need to put more restriction in the economy. But over what period of time, it’s an open question to me,” she said. Her comments are among the most explicit from a Fed official about the need to cool demand through restrictive monetary policy — and about the trade-off: restrictive enough to work, the question is whether it lands on corporate capital spending or on household consumption. “If we can curb it on the capex side, then maybe it doesn’t have to hit as much on the consumption side,” she said.
The backdrop: jobs, prices and the midterms
The interview lands three weeks before the November 3 midterm elections, with the economy topping voters’ concerns. The unemployment rate sits at 4.2%, and recent data has shown a stalling labor market — just 29,000 jobs added last month by one recent measure. Whether the Fed can engineer the soft landing Hammack describes will shape both household budgets and the political mood.
The central bank’s dilemma echoes across this week’s economic news, from energy shocks rippling through global markets to the science of how economies absorb disruption, as covered in Express News Bulletin’s science desk. Read the full interview via Reuters.
