Fed near neutral, staying patient — but watching inflation and debt risks.
Summary:
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Beth Hammack says fed funds rate is “right around neutral.”
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Labour market broadly balanced; unemployment stabilising.
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Fed well positioned to stay on hold — no need to fine-tune policy.
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Local contacts report growth picking up.
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Warns US government debt is on an unsustainable path.
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Notes gold and metals surge may reflect inflation dynamics.
Cleveland Fed President Beth Hammack reinforced her steady-but-firm message, suggesting US monetary policy is now close to neutral and appropriately calibrated.
Earlier she described the labour market as broadly in balance, with unemployment appearing to stabilise and inflation still too high. In her latest remarks, she added that the current fed funds rate is “right around neutral,” implying policy is neither materially restrictive nor stimulative at this stage.
That framing helps explain her view that the Fed is well positioned to remain on hold and does not need to “fine tune” rate policy right now. The message: patience over precision.
Hammack also noted that local business contacts are reporting an uptick in growth, reinforcing the idea that the economy is not rolling over despite restrictive policy settings. Combined with resilient consumer spending, earlier attributed largely to higher-income households, the growth backdrop reduces pressure for near-term easing.
More strikingly, Hammack warned that the US government’s debt trajectory is unsustainable and must eventually be addressed. While fiscal policy is outside the Fed’s mandate, such commentary underscores longer-term macro risks. Rising debt levels could influence term premiums, inflation expectations and financial stability over time.
She also observed that the rise in gold and other metal prices may partly reflect inflation concerns, a subtle nod to market-based signals that price pressures are not fully extinguished.
Overall, the tone remains cautiously hawkish: stable labour market, neutral policy stance, inflation still above target — and no urgency to cut.
This article was written by Eamonn Sheridan at investinglive.com.