Cleveland Federal Reserve Bank President Beth Hammack said Thursday that high economic uncertainty requires a patient and open-minded approach to monetary policy.
This stance suggests the Federal Reserve may slow its pace of easing to avoid premature cuts that could reignite inflation or overlook economic shifts. Because the central bank's decisions influence borrowing costs for millions of consumers and businesses, a pause would signal a more cautious transition toward neutral rates.
Speaking at the Ohio CEO Summit and the Pittsburgh Economic Club, Hammack said that a pause in rate cuts is currently her base case [1, 2]. She said this approach allows the Federal Reserve to assess the impact of previous actions on the economy [1, 3].
According to Hammack, the Federal Reserve implemented rate cuts of 75 basis points during the first quarter [3]. Despite these reductions, she said interest rates should remain restrictive to combat persistent inflation concerns [4].
Hammack said that the current economic outlook remains highly uncertain [1, 2]. She said, "We need to be patient on monetary policy amid high levels of uncertainty" [2].
While a pause is her primary expectation, Hammack said she did not rule out the possibility of policy changes by June if incoming data warrant such action [2]. She said the central bank must remain flexible to respond to shifting financial conditions [1, 2].
Regarding the current trajectory, Hammack said, "Where we are today is my base case" [3].
“"We need to be patient on monetary policy amid high levels of uncertainty."”
Hammack's comments highlight a tension within the Federal Reserve between the desire to support economic growth through rate cuts and the need to ensure inflation remains suppressed. By framing a pause as the 'base case' while leaving the door open for June adjustments, she is signaling that the Fed is prioritizing data-dependency over a predetermined schedule of easing. This cautious approach suggests that the central bank is not yet convinced that inflation is fully defeated, despite the 75 basis point reduction in the first quarter.
