Fed’s Hammack, a prominent member of the Federal Reserve, recently shared his insights on maintaining a modestly restrictive policy to keep inflation in check. In an interview with Yahoo Finance, he emphasized the importance of balancing both sides of the Fed’s mandate, which includes maximum employment and price stability. Hammack highlighted that while wholesale costs are going up, they may not necessarily be passed on to consumers, and it’s crucial to maintain a modestly restrictive policy to prevent inflation from getting too high.

Hammack also addressed the impact of tariffs on the economy, stating that their full effect won’t be seen until next year. He noted that while the tariff impact is starting to affect the economy, it’s just now that we’re seeing the effects. Hammack expressed his concern about inflation being too high and trending upwards, emphasizing the need to stay laser-focused on this issue.

In terms of labor supply and demand, Hammack observed a significant decrease in labor supply, while labor demand may be coming down but so is labor supply. He believes that these changes are important to consider when viewing job data in the context of broader economic changes. Hammack emphasized that the unemployment rate is one of the best indicators we have and does not see any signs of a notable economic downturn.

Furthermore, Hammack stated that he does not see a need for cutting rates based on current data and does not think that Fed policy is far from neutral policy, with no need for stimulative policy. He believes that they have a small distance to get to neutral policy, and their focus should be on maintaining a modestly restrictive policy to keep inflation in check.

Hammack’s comments highlight the importance of striking a balance between maximum employment and price stability, while also keeping an eye on inflation and the impact of tariffs on the economy. By maintaining a modestly restrictive policy, the Fed can help keep inflation in check and support economic growth in the long run.