By Megan Leonhardt
The labor market's anemic growth over the past year is worth keeping an eye on, but Cleveland Fed President Beth Hammack says she's very focused on the fact the inflation has been too high for too long.
To combat that, Hammack said Wednesday, her baseline is that the Federal Reserve is going to have interest rates on hold "for some time." But she didn't rule out implementing rate hikes to bring monetary policy in line -- nor additional cuts.
Hammack, during an appearance on CNBC's Squawk Box, doubled down on her stance that an inflation rate that's consistently above the Fed's 2% target is more of a risk than weak labor conditions. And while some economists, including Fed Chair nominee Kevin Warsh, have been optimistic that artificial intelligence could provide a disinflationary boost to the U.S. economy, Hammack is still not sold on the technology's potentially positive impact on inflation.
"We've been missing on our inflation target for five years," Hammack said. "I'm focused very much on what this means for everyday individuals. Since we've been missing on our inflation target, we've been above that 2% goal over the past five years. Individuals have experienced a decade's worth of inflation in that time period."
Hammack broke that down in real terms, saying that because of persistently above-target inflation, Americans going to the store are spending $120 on groceries when they used to spend $100 for the same cart. If inflation had been at 2%, it would be closer to $110.
Hammack is hearing from individuals in her district who are really struggling to make ends meet -- they're switching from name brand products to store brands, they're buying cheaper meals and they're going without.
"I'm concerned about both sides, but from my perspective, what I see is a labor market that's reasonably in balance," Hammack said. "To me, I think that we're right around where we want to be on the labor side, but we're still persistently missing on that inflation side."
When asked about the implications of AI, Hammack said bluntly that it still isn't clear how this technology will play out in the real economy. "To me, it's still a little too early to draw a conclusion about how this is going to impact the economy overall," she said. "When I'm talking to companies in the district, almost all of them will tell me that they think they're behind the curve on AI."
She noted that she talks to a range of companies and, currently, it's only large companies that have really adopted AI in any meaningful way. Small and medium size enterprises, however, are still experimenting, but they're not using it heavily.
Beyond the everyday hardship that higher price growth brings, Hammack is also keeping consumer inflation expectations top of mind. Expectations of greater inflation can quickly become reality, fueling demand for higher wages, which in turn leads to price growth.
"Right now, inflation expectations look to be reasonably well contained, but it's important that they stay that way -- and that gives us time to be patient, and to make sure that we can deliver on both sides of the mandate," Hammack said.
Hammack also called out the fact that the U.S. has suffered a series of inflationary shocks, including from higher tariffs and now the Iran war.
"All of these successive supply shocks [make it] hard to think about how we're supposed to handle those from a monetary policy perspective. Normally, you like to look through these types of supply shocks, but when it's coming on the back of already elevated inflation, it may not be the same as it would have been had we been entering this period at low and stable inflation," Hammack said.
When asked about the recent actions the Trump administration has taken against the Fed, including the prosecutors making an unannounced visit to the Fed's headquarters on Tuesday, Hammack acknowledged that there's been a "number of these threats to compromise Fed independence over the recent past." But she said it simply makes her more focused on doing her job.
"Federal Reserve Independence is really important so that I and my colleagues can continue to deliver for the American people," Hammack said. "We're independent on the policy area, but we're accountable in Congress."
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 15, 2026 10:44 ET (14:44 GMT)
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