Jamie Spencer
Cleveland Federal Reserve President Beth Hammack emphasized the need for patience and careful analysis in addressing the impact of tariffs on inflation and economic growth. Speaking in her first broadcast interview since taking office in August 2024, Hammack acknowledged the current high level of uncertainty and refrained from committing to any specific course of action on interest rate policy.
Patience Over Preemptive Action
During her interview on CNBC’s “Squawk Box,” Hammack stressed that the central bank should prioritize thorough analysis over rushing into decisions. “I think we need to be patient. I think this is a time when we want to make sure we’re moving in the right direction, rather than moving too quickly in the wrong direction,” she said. “I would rather take our time to make sure we’re looking at the data, the hard data… which are actually really good.”
Her remarks come at a critical juncture for the Federal Reserve, as policymakers continue to evaluate the effects of President Donald Trump’s tariffs on inflation, employment, and overall economic stability.
Fed’s Dual Mandate and Tariffs
Hammack, acknowledging the complexity of balancing the Fed’s dual mandate of stable prices and maximum employment, expressed concerns over the potential conflict between these goals due to the tariffs. “It could be that we have the two sides of our mandate and conflict, which is the most challenging for monetary policy,” she stated. “If it’s higher inflation, lower employment, that’s where things get really complicated.”
In the face of growing market volatility, Hammack’s cautious approach to policy decisions contrasts with the more aggressive market expectations for interest rate cuts. Analysts predict the Fed will keep rates steady during its May 6-7 meeting before initiating cuts in June, with a total of three to four reductions expected by the year’s end, according to CME Group data.
Fed’s Reaction to Economic Conditions
Although Hammack will not vote on rate decisions until 2026, she remains a key voice in the ongoing discussions about how the Fed should approach future economic challenges. “If we have convincing data by June, then I think you’ll see the committee move if we know which way to move at that point,” she explained.
Impact of Uncertainty on Businesses
Hammack also highlighted the uncertainty surrounding tariff policy as a significant burden on businesses. She mentioned that many companies are pausing major investments and rethinking their hiring plans due to the ongoing uncertainty. “What we’re hearing right now is that the uncertainty is really weighing on businesses,” Hammack noted. “It’s creating issues for them in terms of planning, in terms of thinking about where they’re going to go, and so some of them have put pauses on whether they’re going to make bigger investments, whether they’re going to invest in new facilities, new capital plans.”
Looking Beyond Market Movements
Despite the market’s fluctuations, Hammack stressed that the Fed’s focus remains on the real economy and not on short-term market movements. “Our job is not to focus on what the markets are doing. Our job is to focus on how that’s going to impact households and businesses, and what that’s going to mean in the real economy,” she said. “So we’re not steering the markets. We’re steering the real economy.”
Outlook and Uncertainty
While the “hard” economic data such as unemployment and inflation remains relatively strong, Hammack noted that “soft” data, such as surveys, show that businesses are facing significant concerns. She concluded by acknowledging the uncertainty in the economic outlook, stating, “I wish I had a crystal ball. We don’t have one.”
