Fed's Hammack warns of inflation risks, urges cautious withdrawal of restrictive policies

Cleveland Fed President Hammack said on Monday that with inflation still above the Fed's 2% target and remaining stubbornly high, the Fed needs to be "very cautious" in lifting restrictive monetary policy. "I think we're a short distance away from the neutral interest rate, and if we remove that constraint on the economy, I'm worried about overheating again," said Hammack, one of the most hawkish officials who has no vote this year. She did not make it clear whether she supported last week's rate cut. She stressed that inflation remains a major concern for her, while the job market remains close to the Fed's maximum employment goal. Hammack expects the unemployment rate may rise slightly this year, but will fall again soon. "On the inflation side, we've deviated even further from our target, by a full percentage point. And we've failed to meet our target for four and a half years in a row, and we expect to continue to do so for the next few years."