Fed’s Hammack Says No Rate Cuts Until Spring 2026

TLDR

• Cleveland Fed President Beth Hammack says there is no urgency to cut interest rates until at least spring 2025
• Markets now price a nearly 80% chance the Federal Reserve will hold rates steady at the January meeting
• Hammack questions the accuracy of November’s CPI report, suggesting inflation may be higher than reported at 2.9-3.0% instead of 2.7%
• The current Fed policy rate stands between 3.5% and 3.75% after three rate cuts totaling 75 basis points in 2024
• Hammack will become a voting member of the Federal Open Market Committee in 2026, giving her more influence over rate decisions

Cleveland Federal Reserve President Beth Hammack has indicated the central bank should not cut interest rates until spring at the earliest. Her comments signal a pause in the Fed’s recent easing cycle.

Markets have responded to signals from Fed officials in recent weeks. Prediction markets now show nearly 80% odds that the Federal Reserve will hold rates steady at its January meeting.

The Fed cut rates three times in 2024, reducing them by a total of 75 basis points. The current policy rate sits between 3.5% and 3.75%.

Hammack told the Wall Street Journal she sees no reason to adjust rates for several months. She cited concerns about inflation as the primary factor in her view.

The Cleveland Fed president questioned the accuracy of November’s Consumer Price Index report. The report showed headline inflation dropping to 2.7% from 3.1%.

Hammack suggested the data may be distorted due to government shutdown effects. She estimates the actual inflation rate is closer to 2.9% or 3.0%.

Hammack’s View on Neutral Rate Policy

Hammack stated the current rate level is “a little bit below” neutral. This means she believes Fed policy is somewhat stimulative at present.

Her position contrasts sharply with Fed Governor Chris Waller. Waller said three days earlier that current rates are 50 to 100 basis points above neutral.

This gap between policymakers suggests potential disagreements ahead. Hammack will join the Federal Open Market Committee as a voting member in 2026.

The FOMC includes twelve voting members. Four of the eleven Fed district presidents serve rotating one-year terms on the committee.

Hammack’s voting status next year gives her more direct influence over policy decisions. She is viewed as one of the more hawkish Fed officials.

Impact on Markets and Borrowing Costs

New York Fed President John Williams also expressed caution about rate cuts. He similarly stated there is no rush to reduce rates.

The shift in rate cut expectations affects borrowing costs across the economy. Mortgages and credit cards remain more expensive when rates stay elevated.

Risk assets like stocks and cryptocurrencies typically benefit from rate cuts. However, Bitcoin has declined since the Fed began cutting rates in September.

Gold and silver have reached record highs this year. Stocks also remain near all-time highs despite the rate cut pause.

Fed officials want to see more inflation data before changing policy. Employment conditions have softened but remain relatively stable according to policymakers.

The Federal Reserve aims to bring inflation down to its 2% target. Hammack wants clearer evidence that inflation is moving toward this goal before supporting further cuts.

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