Cleveland Fed chief: Inflation remains stubborn despite recent easing

The United States has grappled with elevated inflation for about five years, straining household budgets and keeping policymakers under pressure.

Beth Hammack, president and chief executive of the Federal Reserve Bank of Cleveland and a voting member of the Federal Open Market Committee, told Dayton business leaders Thursday, Aug. 13, that recent reports showing easing price pressures are encouraging, but inflation remains a concern.

Speaking at a Dayton Area Chamber of Commerce breakfast at NCR Country Club and to a nationally livestreamed media event, Hammack said inflation has proven more stubborn than many expected.

“It says to me that it’s more persistent,” Hammack said, referring to inflation trends since the COVID-19 pandemic and related supply-chain disruptions.

Recent inflation reports — the Producer Price Index and the Consumer Price Index — point to lower inflation pressures.

Hammack noted that supply shocks and higher-than-desired inflation have been part of the national story since at least the pandemic.

Hammack is one of 12 voting committee members who get a voice on national monetary policy, deciding at what level interest rates nationwide are set.

Hammack said inflation’s direction and its impact on regional business is one of a “mosaic” of concerns she considers as she goes into Federal Open Market Committee meetings every six weeks or so.

“It’s a $30 trillion economy,” she said.

A new Consumer Price Index report (released Wednesday, Aug. 12) showed that U.S. consumer prices rose just 0.1% in July, bringing the annual inflation rate down to 3.4% from 3.5% in June.

The Fed has a 2% inflation target. Still, given recent history, for inflation-watchers, the new report was welcome news.

“This is the type of inflation report the market was hoping for,” Nationwide Financial Market Economist Oren Klachkin wrote to clients of the recent CPI. “It keeps the disinflation trend intact and so should lower the volume of the alarm bells at the Fed and allow policymakers to keep interest rates steady in September — contingent on the August CPI and employment reports.”

But for Open Market Committee members, there is more to consider than recent numbers.

“Monetary policy is not just about where the economy is today or where it was a month ago, but it’s really about where it’s going to be in three, six, 12 months — and how do we make sure we have good line of sight, to make sure we’re directing things in the right way,” she said.

And yes, committee members weigh how interest rate moves affect businesses, she said.

“What I hear when I talk with local business leaders, is how are you going to factor in new information into your decision-making process, and that tells me where the economy is going to be in three, six and 12 months. And that’s what I really need to understand,” she said.

In a district that includes Ohio, eastern Kentucky, a slice of West Virginia and western Pennsylvania, Hammack oversees 1,100 employees in the Fed’s Cleveland, Cincinnati and Pittsburgh offices who conduct research, supervise banks and provide payment services to commercial banks.

Hammack had a full, two-day agenda in the Dayton and Cincinnati areas Thursday, Aug. 13, and Friday, Aug. 14.

She was heading to a tour of the downtown Dayton Arcade with CityWide Development Corp. and a lunch with Dayton-area business leaders. She will also visit the Digital Transformation Center at the University of Dayton Research Institute.

On Friday, she will tour GE Aerospace and Northern Kentucky businesses.

Hammack likes what she sees in the region.

“There’s a lot going on here, particularly related to Wright-Patt (Wright-Patterson Air Force Base) and related to the defense industry,” she said. “And then also, there’s a huge presence in the health care industry here. And we spend a lot of time talking about small businesses. Small businesses are a critical engine of growth.”

“I’m hoping to get a sense of how people are experiencing the economy,” she said. “What’s working, what’s not working.”

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