Fed's Hammack Prefers 'Slightly More Restrictive' Rates

Watch Fed's Hammack Prefers 'Slightly More Restrictive' Rates - Bloomberg on Dailymotion

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00:00So at this FOMC meeting that we just had a few days ago, I was not a voter. I will start voting

00:04again next year. We have a complicated rotation that happens amongst the bank presidents.

00:09This was a complicated decision. You know, we've reduced interest rates by 50 basis points already.

00:14As I talked about, we're in this challenging time where we've got pressure on both sides of our

00:18mandate. We are seeing some signs of cooling in the labor market. So you're seeing the unemployment

00:24rate move up gradually, which is unusual, but it has moved up gradually. You're seeing much lower

00:31headline payroll growth than what we've seen historically. Now that could be driven by demand

00:36that businesses want fewer workers, but it could also be driven by supply. We've had a huge shift

00:41in terms of the immigration flows. And so the number of new jobs we need to create to keep

00:45unemployment stable, I think is greatly reduced from where it had been in prior years. So in the

00:51past couple of years, they've been running in the couple hundred of thousands of jobs that were being

00:54created over the past three months. We've been averaging closer to 60,000 jobs that have been

00:59created. And so that's something we need to watch closely. But as we talked about as well, on the

01:02other side, inflation has been too high. It's been much closer to 3% than 2%. And so it's a really

01:08difficult balance. To me right now, we've got policy that's right around neutral. It's in that range

01:14of neutral. And when we've got challenges on both sides of our mandate, being close to neutral is

01:20probably the right place to be. I would prefer to be on a slightly more restrictive stance to

01:24help continue to put pressure on that inflation side of our mandate. But we have to watch on the

01:32employment side as well, because I don't want to see further weakening. I don't want more people

01:35out of jobs than need to be. That's extremely painful. And that's going to make this affordability

01:40crisis even worse if we see unemployment tick up. And so it's a challenging time to look at how we

01:47should be positioning policy. But my perspective is that right now, after the 75 basis points of

01:51reductions that the committee has taken over the last quarter of this year, we're right around a

01:58neutral policy. And I want to be watching carefully as we get this data over the next several months

02:02to see, are we seeing inflation start coming down towards our objective? Are we seeing the

02:07employment level stabilize? Those will be key signals to me that we're moving into a place where

02:13this can be a policy rate that we can maintain.