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Investing.com -- Federal Reserve Bank of Cleveland President, Beth Hammack, has advocated for maintaining current interest rates for an undetermined period. This comes as policymakers continue to monitor inflation rates and assess the impact of new governmental policies on the economy.

Hammack expressed that while there has been substantial progress, the target 2% inflation rate has not yet been reached. She made these comments in a prepared speech at an event in Lexington, Kentucky, on Tuesday. Hammack stated that she awaits evidence of sustainable inflation returning to 2% before considering policy adjustments, provided the labor market remains robust.

Hammack identified two main factors that justify a patient approach to monetary policy. Firstly, she highlighted the potential inflation risks that persist, such as strong consumer spending and the possible delayed economic stimulation from last year's rate cuts. Secondly, she stressed the uncertainty surrounding new government policies relating to regulation, taxes, immigration, and tariffs, stating that it will require time to study these factors and determine an appropriate monetary response.

Using tariffs as an example, Hammack argued for a patient assessment of their long-term effects. She noted that due to the recent history of high inflation, the risks to the inflation outlook seem to be biased towards the upside. This could potentially postpone the return to a 2% inflation rate and risk further embedding high inflation into the economy.

Hammack also reiterated that the current policy is only modestly restrictive, suggesting that the Federal Reserve may already be at, or near, a neutral setting. A neutral stance refers to a level of interest rates that neither stimulates nor hinders economic activity.

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