Summary:
-
Cleveland Fed President Hammack favours holding rates steady for several months
-
She is more concerned about inflation than labour-market weakness
-
November CPI likely understated true inflation, she argues
-
Neutral rate seen higher, implying policy may already be stimulative
-
Tariff-related cost pressures risk renewed price increases in Q1
Beth Hammack signalled a clear preference for policy patience, arguing the Federal Reserve should hold interest rates steady for several months after delivering cuts at its past three meetings. Speaking in an interview with the Wall Street Journal (gated), Hammack said she remains more concerned about inflation risks than potential fragility in the labour market, pushing back against the easing cycle that has lowered rates by a cumulative 75 basis points.
Although Hammack was not a voting member of the rate-setting committee this year, she will become a voter in 2026, making her views increasingly relevant for markets assessing the Fed’s policy direction. Her base case is for rates to remain unchanged until there is clearer evidence that inflation is returning convincingly toward target, or that employment conditions are deteriorating more meaningfully.
Hammack also cast doubt on the strength of the latest inflation data. While November’s consumer-price index showed headline inflation at 2.7% year-on-year, she argued the reading likely understated true price pressures due to data-collection distortions linked to the October government shutdown. Adjusted estimates, she said, point closer to the 2.9%–3.0% range that most forecasters had expected, reinforcing her caution about declaring victory on inflation.
A central pillar of Hammack’s stance is her belief that the neutral interest rate, the level that neither stimulates nor restrains economic activity, is higher than widely assumed. From her perspective, current policy settings may already be mildly stimulative after the recent rate cuts. With growth expected to remain solid into next year, she sees little urgency to provide further accommodation.
Looking ahead, Hammack suggested the Fed could reassess policy around spring, once it becomes clearer whether goods-price inflation is easing as tariff-related costs work their way through supply chains. She noted that business leaders continue to flag rising input costs, including those linked to tariffs, which could prompt larger price increases early in the year.
That prospect is troubling, she said, given inflation has remained stuck just below 3% for much of the past 18 months. Until that persistence breaks, Hammack argued, holding rates steady is the more prudent course
