Cleveland Fed President Beth Hammack reinforced the case for a prolonged pause in rate cuts, emphasizing that it will likely be “appropriate to hold the funds rate steady for some time.”
She highlighted the need for a patient approach, allowing Fed to assess the labor market, inflation trends, and overall economic performance under the current policy stance.
Hammack noted that inflation risks remain “skewed to the upside,” with possibility of delaying the return to 2% target. The “recent history” of elevated inflation adds complexity to the outlook, raising concerns about entrenched pricing pressures.
She also pointed to “considerable uncertainty” surrounding government policies, particularly with regard to the “ultimate effects” of recent tariff measures.
Powell reaffirms Fed’s patience, signals no urgency for rate cuts
Fed Chair Jerome Powell reiterated in the Semiannual Monetary Policy Report to Congress that Fed is not in a hurry to cut interest rates.
A prolonged policy hold remains on the table if inflation does not continue its downward trend. However, he also acknowledged that if the labor market weakens or disinflation accelerates, Fed could respond with further easing.
Powell noted that if inflation fails to make sustained progress toward the 2% target, Fed can “maintain policy restraint for longer.” On the flip side, if the labor market weakens unexpectedly or inflation declines more rapidly than forecast, Fed “can ease policy accordingly.”
Full opening remarks of Fed Powell here.