Fed Chair Beth Hammack Advocates Patience on Interest Rates Amid Uncertainty Over Trump Policies
Federal Reserve Chair Beth Hammack stressed the need for clear economic data before adjusting interest rates, amid uncertainty over former President Trump's trade and fiscal policies. Speaking at Stanford University on May 9, Hammack noted limited data availability before the June FOMC meeting, advocating a cautious approach. The Fed has maintained its interest rate at 4.25%–4.50% since December. Hammack highlighted the dual risks of tariffs, which could raise inflation and dampen economic activity, and emphasized the importance of understanding policy impacts before making rate changes.
Key Updates
05/10 01:01
Fed Chair Beth Hammack Advocates Patience on Interest Rates Amid Uncertainty Over Trump Policies
Federal Reserve Chair Beth Hammack stressed the need for clear economic data before adjusting interest rates, amid uncertainty over former President Trump's trade and fiscal policies. Speaking at Stanford University on May 9, Hammack noted limited data availability before the June FOMC meeting, advocating a cautious approach. The Fed has maintained its interest rate at 4.25%–4.50% since December. Hammack highlighted the dual risks of tariffs, which could raise inflation and dampen economic activity, and emphasized the importance of understanding policy impacts before making rate changes.
Fed Seeks Clarity in a Foggy Policy Landscape
Speaking on the sidelines of a monetary policy conference at Stanford University’s Hoover Institution on May 9, Hammack laid out the Federal Reserve’s challenge in assessing the economic impact of the Trump administration’s evolving policy agenda. “It is all premature to me — I think everything is very fluid and I think we need to really wait and see how the data play out,” she said, pointing to the lack of clarity around tariffs, deregulation, and spending initiatives.
The Fed has held its benchmark interest rate steady at 4.25%–4.50% since December, and Hammack indicated that this “modestly restrictive” stance remains appropriate for now. “Given the economy’s starting point, with inflation still elevated and with both sides of our mandate expected to be under pressure, there is a strong case to hold monetary policy steady,” she said in prepared remarks.
Limited Data Before June Meeting
Hammack noted that the window for new economic data ahead of the June Federal Open Market Committee (FOMC) meeting is narrow. “There’s not a lot of data between now and June,” she said, reinforcing the Fed’s data-dependent approach. The next major data releases include April’s Consumer Price Index (CPI) and Producer Price Index (PPI), both scheduled for mid-May, but these may not be sufficient to provide the clarity policymakers are seeking.
The most recent GDP report showed a 0.3% annualized contraction in the first quarter, but Hammack and other Fed officials have downplayed its significance, citing distortions from trade policy. “To me, the economy has been resilient and the jury is still out on its future course,” she said.
Tariffs Complicate the Outlook
The reintroduction of tariffs under Trump’s administration has emerged as a key source of uncertainty. While tariffs can raise inflation by increasing import costs, they can also dampen economic activity by reducing business investment and consumer spending. Hammack acknowledged this dual risk, stating, “It’s important for us to sit back and make sure we’re thinking about all of the different policies, because they do work in different directions.”
Fed Chair Jerome Powell echoed this sentiment earlier in the week, noting that the full scope and duration of the tariffs remain unknown. “It’s not yet clear by how much, or for how long, or in what order,” Powell said, referring to the potential inflationary and employment effects of the trade measures.
Business Sentiment and Labor Market Signals
In her district, Hammack reported that businesses are preparing for potential downturns but have not yet acted decisively. “Contacts in my district are laying contingency plans to shrink their workforce if demand weakens,” she said. However, many firms are still holding on to workers after years of labor shortages. “People don’t know which way it will settle out,” she added.
The national unemployment rate remains low at 4.2%, and the labor market has shown resilience. But Hammack warned that if tariffs lead to sustained price increases and economic weakening, the Fed may need to shift its focus more squarely to employment. “We’d want to really focus on the employment side of our mandate,” she said.
Inflation Risks and Policy Patience
Hammack also addressed the inflationary implications of the new trade policies. While some businesses may implement one-time price hikes, others are planning a series of adjustments as they gain clarity on import taxes. This staggered response could extend inflationary pressures into the summer, complicating the Fed’s efforts to maintain price stability.
“There’s a real question about what those impacts are going to look like, and so it may take longer,” Hammack said, reiterating her readiness to act only when “clear and convincing evidence” emerges.
Other Fed officials, including Governor Lisa Cook and Richmond Fed President Tom Barkin, have similarly highlighted the challenges posed by policy uncertainty. Cook noted that trade-related disruptions could reduce productivity and increase inflationary pressure, while Barkin likened the current environment to “driving in fog,” with businesses cutting discretionary spending but avoiding major layoffs.
A Deliberate Approach Amid Competing Risks
The Fed’s current stance reflects a balancing act between the risks of persistent inflation and a potential economic slowdown. With the next FOMC meeting scheduled for June and few data points expected before then, Hammack’s comments suggest the central bank is likely to remain on hold barring a significant shift in the economic landscape.
“I stand ready to move whenever we have clear and convincing evidence,” Hammack said. “But given the overall breadth of the policies that have been discussed and put in place, I think there’s a real question about what those impacts are going to look like.”
As the Fed continues to monitor developments, the path forward remains uncertain — shaped as much by the evolving policy environment as by the data that will eventually emerge.
