Cleveland Fed’s Hammack Signals Support for Holding Rates at Current “Barely Restrictive” Level
Cleveland Federal Reserve President Beth Hammack signaled that the Fed may be approaching the end of its current rate-cut cycle, arguing that monetary policy is no longer meaningfully restrictive. In an interview with CNBC, she said the federal funds rate—now between 3.75% and 4%—is close to a “neutral” level that neither stimulates nor slows the economy. Her comments underscore a growing divide inside the Fed, with some policymakers increasingly hesitant to cut deeper while inflation progress remains uneven.
Hammack emphasized that her priority is keeping inflation on a clear path back to 2%, even if the job market shows signs of cooling. She noted that many households and businesses she speaks with still feel squeezed by higher prices, despite official inflation data showing gradual improvement. Families, she said, are sharing the same story: their paychecks are not stretching as far, and everyday goods cost significantly more than they did just a few years ago. This persistent financial strain influences her belief that policy must remain “somewhat restrictive” to avoid any resurgence in price pressures.
Her comments come just weeks before the Fed’s December 9–10 meeting, where the outlook for another rate cut has become increasingly uncertain. Markets once viewed a December cut as nearly guaranteed, but the odds have fallen to about 60% as policymakers signal mixed views. Minutes from the Fed’s October meeting highlight the tension: some officials worry that hiring is slowing and unemployment is rising, while others warn that inflation progress is still too fragile for aggressive easing. Hammack, who leans hawkish and will vote on policy next year, clearly aligns with the latter group.
The newly released September jobs report added further complication. Payrolls rose more than expected, suggesting continued resilience, yet the unemployment rate edged higher—a conflicting combination that reinforces the Fed’s dilemma. Hammack described the data as “mixed,” arguing that the central bank must weigh the full picture rather than reacting to a single month.
Her broader message for 2026 is that the era of rapid rate cuts may be nearing an end. If the current policy stance is already close to neutral, the Fed may need to pause soon to avoid overstimulating the economy. Hammack believes rates should not fall much further unless inflation shows more convincing improvement, even as parts of the job market begin to soften. Her outlook adds momentum to the cautious camp inside the Fed, hinting that rate cuts in 2026 could be slower, smaller, and more data-dependent than many previously expected.
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