(Wall Street Journal) — CLEVELAND — When Beth Hammack was selected last year to lead the Federal Reserve Bank of Cleveland, one of her former colleagues on Wall Street predicted she would waste little time in leaving her stamp on monetary policy.

Hammack didn’t disappoint. The former Goldman Sachs treasurer opposed the Fed’s decision to lower interest rates at its most-recent meeting — and just her third at the central bank.

Not only are prices much higher than they were a few years ago, “we still have an inflation problem. We still have a rate-of-change problem that we need to address,” Hammack said in an interview Tuesday. “We’ve made amazing progress on it, but we need to continue to finish the job.”

Reflecting on last month’s rate cut, she added, “For me, that December conversation was really about, did you need to do it now, or could you be more patient and wait and see.”

During much of the period after the 2008-09 financial crisis, the Fed had an uneasy relationship with Wall Street, wary of perceived closeness with the financial institutions it had rescued.

But over the past year, the central bank has promoted to its senior ranks a handful of officials with long careers in financial markets, including Hammack. Their appointments reflect a Fed that is trying to stay on top of how its policies are transmitted to the wider economy when old assumptions about interest rates and inflation are being rethought.

Hammack voted with Fed Chair Jerome Powell in favor of a larger-than-expected rate cut of a half-percentage point, or 50 basis points, in September. At the time, “My expectation was that 75 for the year was the right thing to do,” she said. The Fed made a second cut of 25 basis points in November.

By December, another cut didn’t add up. “The data had all come in stronger,” she said.

Arguments that the Fed needed to follow through with a rate cut because markets expected it fell flat with Hammack. “Just because something’s priced into the market, to me, is an insufficient reason to do it,” she said.

The central bank puts a premium on consensus, and dissents have been rare in the Powell Fed. Hammack’s dissent was just the second at a policy meeting since mid-2022.

Hammack said that she didn’t make the decision lightly and that she had consulted with Powell and other Fed colleagues. The message she got was supportive. “Dissents happen, and it’s OK. And it doesn’t matter that it’s your third meeting. You’re supposed to vote your conscience,” she said.

The Fed is expected to hold its benchmark short-term rate steady at its meeting in about two weeks. Solid employment figures last week raise the prospect that the central bank could leave rates where they are for a while.

When it comes to making further cuts, “We can be very patient,” Hammack said. She now thinks it is likely that, decades from now, the ultralow rates of the 2010s will look more like the exception and not the norm.

As a result, Hammack thinks rates today are only moderately restrictive. She said she views a recent tightening in financial conditions, with longer-dated bond yields rising, as helpful on balance in finishing the Fed’s inflation fight.

Hammack, 53, spent three decades at Goldman, where she was global treasurer during the Covid-19 pandemic. Before leaving the bank last year, she was co-head of its global financing group. She served as the chair of the Treasury Borrowing Advisory Committee, a group of Wall Street executives who advise the U.S. Treasury on debt issuance, from 2018 to 2023.

In the years after the 2008-09 financial crisis, the central bank turned cautious about the perception of tight ties with Wall Street. Bank economists stopped being invited to the Kansas City Fed’s annual symposium in Jackson Hole, Wyo.

In 2015, the selection of two Goldman alums to head reserve banks in Minneapolis and Dallas — Neel Kashkari and Robert Kaplan, respectively — fueled a backlash, particularly from liberal advocacy groups. (Kaplan resigned his position in 2021 in the midst of criticism over his personal trading activity and rejoined Goldman last year after an internal Fed watchdog cleared him of wrongdoing.)

Between 2017 and 2022, the Fed largely turned to academics or promoted senior leaders from its own ranks to fill vacancies at the top of the reserve banks — including in New York, San Francisco, Atlanta, Boston, Dallas and Chicago.

The presidents of the Fed’s 12 quasiprivate reserve banks are chosen by the individual banks’ boards of directors, whose members are typically business or nonprofit executives. The selections must be approved by the Fed’s Washington-based Board of Governors, whose members are appointed by the U.S. president.

All five Fed governors who have joined the board since 2020 — one an appointee of Donald Trump and four picked by President Biden — have been academics.

Together, the 12 regional-bank presidents and seven Washington-based governors convene roughly every six weeks for meetings of the rate-setting Federal Open Market Committee.

Hammack said she has long been interested in public service and said potential skeptics should judge her on what she does in the job. “It’s really critical that we have 19 different people in the FOMC room, each of whom brings a very different skill set to bear,” Hammack said.

By the end of the past decade, some economists who work in finance expressed concern that the Fed didn’t have enough markets horsepower in the policymaking ranks.

“You’ll come to a better decision” with more diverse views, including from former market practitioners, said James Bullard, an academic economist who was president of the St. Louis Fed from 2008 to 2023. “I think it would probably be a bad thing to have too many people like me on the committee.”

Bullard’s successor, Alberto Musalem, spent much of his career in finance. In 2023, the Kansas City Fed also named Jeff Schmid, a former executive and regulator of midsize and community banks, as its president.

Musalem said his experience in finance and on corporate boards led him to put a premium on following the data and to resist presuppositions about how the economy works.

“I’d like to be recognized as a pragmatist,” said Musalem in an interview last week. “To say, ‘There were times he took a more hawkish view. There were times he took a dovish view.'”

Likewise, Hammack said she sees her job as trying to fuse the analytical rigor of economic theory with the operational agility of market practitioners and businesspeople. “You don’t want to be so married to the ideology that you’re not looking at the actual things that are happening in the world,” she said. “But you can’t just go by your gut. You have to have some stars to guide you.”

–Matt Grossman contributed to this article.