Fed’s Hammack says FOMC has more work to do on inflation

Federal Reserve Bank of Cleveland President Beth Hammack said that while progress on lowering inflation had resumed in recent months, officials aren’t yet ready to declare their mission accomplished. 

“We have made good progress, but inflation is still running above the FOMC’s 2% objective,” Hammack said Thursday, referring to the rate-setting Federal Open Market Committee. “The pandemic and its aftermath have been a reminder that differing movements across the components of inflation can have important implications for the path of aggregate inflation.”

Speaking at a conference hosted by the Cleveland Fed’s Center for Inflation Research, Hammack delivered her first extended public remarks on the economy since becoming a policymaker in August.

She pointed to several factors that could continue to put upward pressure on prices. Geopolitical events could cause energy prices, which had recently declined, to “rapidly reverse course,” she said.

Hammack also said that while housing services inflation had come down, research from the Cleveland Fed suggests it could remain elevated as existing tenants face gradual rent increases. 

The Cleveland Fed president said that while the central bank’s progress on inflation had not moved in a “straight line,” officials have been able to cool price growth while maintaining notable strength in the labor market and the economy overall.

Hammack didn’t comment on how quickly or how far the Fed should lower interest rates.

Policymakers cut interest rates by a larger-than-usual half percentage point at their meeting last month, lowering rates for the first time since the onset of the pandemic, as the labor market showed signs of weakness and inflation approached the Fed’s 2% goal.

Several policymakers have recently indicated they favor slower, or more gradual rate cuts in the coming months.