Fed Officials Admit They’re Trapped Between Jobs and Inflation
The Federal Reserve’s decision to trim interest rates by a quarter point brought little surprise to markets, but comments from policymakers quickly shifted the tone.
Instead of signaling confidence, officials highlighted the complex challenges the central bank still faces in steering the economy.
Jerome Powell, speaking just after the rate cut was announced on September 23, described the outlook as anything but straightforward. He pointed to inflationary pressures that remain stubborn on one side, and an employment picture showing signs of fragility on the other. “Balancing those forces,” Powell explained, “is no easy task.”
Hammack Warns of Prolonged Struggle
His caution was soon reinforced by Cleveland Fed President Beth Hammack. In an interview with CNBC, she admitted that the central bank finds itself in one of its most difficult positions in years. According to Hammack, progress on inflation has been disappointingly slow despite years of restrictive policy.
“We’ve been aiming for 2% for more than four years, yet we still haven’t consistently reached it,” she said, acknowledging her concern that cutting rates could make the fight against inflation even harder. Hammack stressed that there is no simple answer to whether easing now was the right choice.
Inflation Target May Remain Out of Reach for Years
Looking ahead, Hammack projected that the Fed’s 2% target may not be met until late 2027 or even 2028. She warned that inflation is likely to remain above target levels for at least the next year or two, keeping the central bank in a tight spot as it tries to protect jobs without losing control of prices.
The message from both Powell and Hammack reflects a Federal Reserve caught in a difficult tug of war. Rate cuts may support growth in the short term, but officials appear wary of declaring victory too soon, mindful that inflationary flare-ups could undo years of policy effort.
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