Clevelend Fed Hammack discusses economic outlook and monetary policy
Investing.com -- Federal Reserve Bank of Cleveland President and CEO, Beth Hammack, delivered a speech at the University of Kentucky Gatton College of Business and Economics Economics Outlook Conference in Lexington, Kentucky, discussing the Federal Reserve's role in the economy and her perspectives on the economic outlook and monetary policy.
Hammack, who took on her role as Cleveland Fed president in the summer of 2024, has visited Kentucky twice since her appointment, engaging with local businesses, community leaders, and nonprofit workforce development programs. She expressed her gratitude for the opportunity to share insights about the work of the Federal Reserve and its impact on the economic lives of Americans, including those in Kentucky.
Hammack emphasized the importance of the Federal Reserve's independence from political pressures, citing research that countries with politically independent central banks tend to experience lower inflation rates. She also noted that the Federal Reserve's role extends beyond setting interest rates, with responsibilities including promoting financial stability, supervising and regulating financial institutions, supporting the nation’s payments system, and promoting consumer protection and community development.
In discussing the economic outlook, Hammack noted that the U.S. economy is strong and the labor market is healthy, despite the significant swings in economic activity caused by the pandemic over the last five years. She highlighted that real GDP grew 2-1/2 percent over the last year, a rate similar to the average rate experienced during the 10 years before the pandemic-induced recession.
She also pointed to strong consumer spending throughout 2024, supported by a healthy labor market, rising real wages, and elevated household wealth. Reports from regional business contacts suggested that retail shopping accelerated late last year, with holiday sales coming in stronger than expected.
On the topic of the labor market, Hammack noted that while conditions have cooled from early 2023, they remain healthy. The unemployment rate was 4.0 percent in January 2025, and total nonfarm payroll employment increased by 143,000.
Inflation, according to Hammack, has eased considerably over the last two years but remains above the Federal Open Market Committee’s 2 percent objective. She stressed the need to bring inflation all the way down to 2 percent, noting the real and perceived costs of elevated inflation, which are not borne evenly across the population.
On the subject of monetary policy, Hammack stated that the Federal Open Market Committee is committed to achieving its dual mandate goals of maximum employment and price stability. She noted that the fed funds target range was reduced by 1 percentage point last year to 4-1/4 to 4-1/2 percent, reflecting progress on inflation, cooling in the labor market, and the evolving balance of risks.
In conclusion, Hammack emphasized that the Federal Reserve is focused on its mission to support the economy and financial system on behalf of the public. She noted that while the overall economic picture looks positive, there are families who are still struggling. The Cleveland Fed, she said, is active in communities across the Fourth District to help better understand regional economic developments.
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