Fed Rate Cut: A Lone Dissenter Speaks Out
This week, the Federal Reserve made headlines with its decision to cut interest rates, but not everyone was on board. Beth Hammack, president of the Cleveland Fed, was the sole dissenter, citing concerns that inflation remains a pressing issue.
A Close Call, But a Firm Stance
In a statement released on Friday, Hammack explained that her decision was a “close call,” but she believes that monetary policy needs to remain modestly restrictive for some time to combat inflation. With the US economy showing strength, Hammack prefers to hold policy steady until there is further evidence that inflation is resuming its path to the Fed’s 2% objective.
The Inflation Conundrum
New inflation data released on Friday showed that price increases fell month over month in November, but still remained sticky. The core Personal Consumption Expenditures (PCE) index, a key metric tracked by the Fed, rose 0.1% from the prior month, a deceleration from October’s 0.3% monthly gain. While this is a step in the right direction, Hammack notes that inflation remains elevated, and recent progress in returning inflation to 2% has been uneven.
A Healthy Job Market, But Inflation Remains a Priority
The job market remains healthy, but Hammack believes that the Fed should maintain its focus on getting inflation back down to 2%. “It is important to maintain the focus on returning inflation to 2 percent in a timely fashion,” she emphasized. Hammack’s dissent marks the second since the Fed began its rate-cutting cycle in September, highlighting the ongoing debate among policymakers about the best approach to managing inflation.
Scaling Back Expectations
In addition to Hammack’s dissent, Fed officials also scaled back their expectations for rate cuts in 2025, citing concerns about the persistence of inflation. This move suggests that the Fed is taking a more cautious approach to monetary policy, acknowledging that there is still more work to be done to bring inflation back under control.
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