Former Cleveland Fed President Beth Hammack Talks Interest Rates.

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Tom Keene** (0:07)
As clouds rolled in late last night, Fed officials were gathering in the main hall. And joining us now is one of those Fed officials, Cleveland Fed President, Beth Hammack. It is so good to have you, President Hammack, on set with us this morning. You have been very vocal about your desire to raise rates that you think that the inflation has been too hot for too long. Have you heard anything at this meeting that changes your mind?

**Beth Hammack** (0:29)
Well, the meeting starts in earnest this morning with the Chairman's speech, and that will be the kickoff.
The data that I've seen since our last meeting has been, to me, very much in line with the picture that I was seeing before. And of course, I'm setting my policy views based on the forecast of where I think the economy is headed rather than where we were over the past several years, but we've been missing on our inflation target for more than five years. My forecast is that we're going to continue to end this year around 3% inflation, and by the end of 27, we'll hopefully get down to the mid two-and-a-halves, the mid two-percents. But that's not meeting our 2% objectives. So to me, there's no tension in our mandate. We've got an employment picture that's right around my estimate of maximum employment. It's been stable and in balance for the past 12 months, and we've been missing on the inflation side. I don't see restrictiveness in the markets. When I talk to people in the capital markets, what I'm hearing is that capital is free-flowing, investors are looking to put more capital to work, businesses are looking to make bigger investments.
So I think we need to put some restriction into policy, and so I believe it's time to act for us to do that. The longer that we wait to get inflation under control, the more pain is felt by everyday Americans and the more difficult it may be for us to ultimately get it back down.

**Michael McKee** (1:35)
We were talking last night about the meanings of the word reaction function, and some of our colleagues were saying, wow, that's kind of a fancy name. Super technical. Super technical name.

**Beth Hammack** (1:44)
Mathematical formula.

**Michael McKee** (1:45)
What is it that Kevin Warsh is not doing? How do you define what Wall Street is looking for, and how do you put your own views into that?

**Beth Hammack** (1:54)
Well, I can't tell you anymore what Wall Street is looking for because now I'm on the policy maker side, I'm no longer on the market participant side. But I can tell you, I view communicating about my viewpoints as a critical part of the job. I think talking to the public, listening to the public, hearing what they're experiencing, hearing how they're seeing the economy unfold, is a critical part of what I do every day.
I need to help put my views out there so that businesses and households can make better informed decisions. I like to tell people when new data comes in, how is that going to change my perspective? How might that change the decisions that I and maybe my colleagues are going to make? Because I feel like that will help them to manage their businesses and their household finances.

**Michael McKee** (2:30)
Well, when you look at what the chair might have to say today, kind of the bottom line question for other members of the Open Market Committee is, how do you feel about the idea of not giving forward guidance? And particularly given your background, having the bond market tell the Fed what it thinks is happening in the economy?

**Beth Hammack** (2:50)
Well, the markets are definitely one component that I look at. Financial conditions and FCI indices are something that I spend time looking at to get a sense of how monetary policy is transmitting into the real economy.
But having spent 30 years in markets, I can tell you that market participants tend to be focused on making money for themselves and their clients. And they do that by betting on what the Fed will do, not what the Fed should do. And so I think markets are an important complement, but not a substitute for the Fed.

**Lisa Abramowicz** (3:15)
You're underselling yourself, 30 years, you were sterling in the repo market at Goldman Sachs. There's no one in the history of the Fed that understands short-term paper like you do.

**Michael McKee** (3:24)
You got it done.

**Lisa Abramowicz** (3:25)
But it's true, you undersell yourself.

**Beth Hammack** (3:27)
I think we have a lot of experts. The staff is incredible at the Fed. That has been one of the most high-level things.