Federal Reserve Bank of Cleveland President Beth Hammack said this week she voted against cutting interest rates by the United States financial regulator, as the strengthening of the US economy and inflation outlook do not indicate expediency of further easing of monetary policy.
Beth Hammack reckons that the monetary policy of the Federal Reserve System should remain steady until new signs are recorded that the inflationary process has a vector of movement to the target of 2%. It is worth noting that other Fed officials are of the opinion that the current dynamic of inflation already contains evidence of a gradual approach to the specified target.
Beth Hammack said that keeping borrowing costs at the same level this week would be the best decision, given the strength of recent economic data, accommodative financial conditions, and her forecast that inflation will be slightly above 2% over the next year amid a healthy labor market.
It is worth mentioning that on Wednesday, December 18, the central bank of the United States cut its federal funds target range by a quarter percentage point, to between 4.25% and 4.5%. The relevant decision coincided with the preliminary expectations of experts. The Fed also revised its forecast on the scale of monetary policy easing next year. Currently, the central bank of the United States expects to make two decisions on lowering borrowing costs in 2025. At the same time, in September, the US financial regulator projected that four monetary policy easing decisions would be made next year.
Federal Reserve Bank of New York President John Williams said this week that he expects the central bank of the United States to deliver more interest rate cuts. At the same time, as part of the relevant statement, it was separately noted that lowering the cost of borrowing will be driven by incoming data against the background of policy, which still restricts economic momentum.
According to John Williams, the monetary policy of the central bank of the United States continues to be pretty restrictive even after another interest rate cut. This means that short-term rates continue to restrain the economy, which should contribute to further easing inflationary pressures. John Williams also stated that the baseline trajectory of US monetary policy continues to move down towards neutral rates. In his opinion, the Fed should be data-dependent and have time to really assess the relevant information. It is worth noting that the central bank of the United States is already following an appropriate approach in the context of monetary policy decisions.
