According to Cleveland Federal Reserve President Beth Hammack, the Federal Reserve is taking a cautious approach and needs more time to assess how the economy will react to President Donald Trump’s policies, including tariffs. With many aspects of the administration’s agenda still uncertain, Hammack emphasized the need for clear and convincing evidence before considering any monetary policy adjustments. She highlighted the complexity of potential impacts from the discussed policies and the lack of upcoming data before the Fed’s next meeting in June.
While recent economic data showed a contraction in the U.S. economy last quarter, Hammack believes it is too early to determine the future trajectory due to distortions caused by trade policies. She acknowledged the resilience of the economy but stressed the importance of observing how the data unfolds. Despite a strong job market, concerns about the potential impact of tariffs on employment and inflation remain.
Hammack and her colleagues are closely monitoring developments, including businesses preparing for workforce adjustments in response to potential weakening demand. Uncertainty surrounding trade negotiations and tariff implications has led the Fed to maintain short-term interest rates at their current level. The Fed is mindful of the various consequences of spending policies, deregulation, and tariffs, and Hammack emphasized the need for a comprehensive assessment of these factors.
As businesses navigate uncertainty and potential price adjustments due to tariffs, the Fed is cautious about the possibility of persistent inflation if issues linger. Hammack stressed the importance of considering all policies collectively to understand their diverse impacts on the economy. With the situation evolving, the Fed is approaching the decision-making process with a holistic perspective.
