Federal Reserve Hamak warns of inflation risks, calls for cautious withdrawal of restrictive policies

With inflation still above the Fed's 2 per cent target and remaining stubbornly high, the Fed needs to be "very cautious" in unwinding its restrictive monetary policy, the president of the Cleveland Fed said on Monday. "I think we are only a short distance from a neutral interest rate, and if that constraint on the economy is removed, I fear it will overheat again," said Mr. Hamak, one of the most hawkish officials who does not have a vote this year and who did not make clear whether she supported last week's rate cut. She stressed that inflation remained a major concern for her and that the job market remained close to the Fed's maximum employment target. Mr. Hamak predicted that the unemployment rate could rise slightly this year but fall again soon after. " On the inflation side, we missed our target even more, by a full percentage point. And we have missed our target for four and a half years in a row, and we expect to continue to deviate in the coming years. "