Fed’s Hammack pushes back on cuts, says inflation still too high

Cleveland Fed President Hammack has indicated a preference for holding interest rates steady for several months due to inflation concerns. After three consecutive rate cuts, she emphasizes that risks related to inflation should take precedence over labor market fragility. She suspects that the November consumer price index likely understated true inflation pressures, positing that real inflation is closer to the 2.9%-3.0% range. Hammack's view is increasingly significant as she will become a voting member in 2026. She believes that the neutral interest rate is higher than currently assumed, implying that recent policy settings may not be significantly stimulating economic activity. Looking ahead, potential tariff-related cost pressures could pose an upcoming risk for renewed price increases, particularly as inflation has persisted just below 3% for an extended period. Hammack concludes that holding rates steady is the more prudent strategy until clearer evidence of inflation reduction emerges.