Cleveland Fed President Hammack's Wait and See Strategy

Cleveland Fed President Hammack's Wait-and-See Message

The Federal Reserve (Fed) has drawn attention with its 75 basis point rate cuts in the last three meetings. However, Cleveland Fed President Beth Hammack stated in an interview with the Wall Street Journal that there is no need for the central bank to change the policy interest rate for a while longer.

Labor Market and Inflation Concerns

Hammack expressed her concern about inflation remaining at high levels, emphasizing that Fed officials are cautious about the "fragility in the labor market" scenario that influenced interest rate cut decisions. She stated that this situation indicates the main risk is on the price stability side.

Interest Rate Strategy for the Future

Arguing that the current benchmark interest rates should remain in the 3.50-3.75 range, Hammack said, "My base scenario is that we could stay at current levels until we see clearer evidence that inflation is moving toward the target or until we see concrete signs of weakness in employment." These statements signal a potential pause in the easing cycle that the Fed has initiated in recent months.

Risks of Acting in Haste

In her interview recorded on Thursday and published on Sunday, Hammack emphasized the importance of data-driven action. She stated that markets should not act hastily, calling on investors to be cautious.