Fed’s Hammack Says Rate Cuts May Stay on Hold Ahead of Jobs, CPI Data Release

Federal Reserve President Beth Hammack has indicated that the FOMC could hold off on more Fed rate cuts for now, noting that inflation remains too high. Her remarks come as crypto traders are reducing their expectations for the number of cuts the Committee is likely to make this year, even with Trump signaling that Fed chair nominee Kevin Warsh will lower rates.

Hammack Signals Support For Pause On Fed Rate Cuts

In remarks delivered at an event in Ohio, the Fed president said rate reductions could be on hold for some time, based on her forecast. This came as she noted that, rather than trying to fine-tune the funds rate, she would prefer to err on the side of patience as they assess the impact of recent rate cuts and monitor how the economy performs.

Commenting on their dual mandate of employment and inflation, Hammack noted that the labor market appears to be roughly balanced. Meanwhile, inflation is “still too high,” which is why they should hold off on further Fed rate cuts for now. The Fed president also warned that there is the risk of inflation persisting near 3% throught this year. She had also mentioned during the event that it was important to bring inflation down to their 2% target before changing rates again.

The Cleveland Fed president was one of those who voted in favor of holding rates steady at the January FOMC meeting. Commenting on this, she stated that they are in a good position to keep the funds rate at this level and see how things play out. Hammack estimates that the funds rate is now near neutral, meaning it is not “meaningfully restraining the economy.”

Her remarks come as crypto traders reduce their Fed rate cut expectations for this year. Polymarket data show that these traders now favor only two cuts, down from three, despite Trump’s nomination of former Fed Governor Kevin Warsh.

Dallas Fed President Echoes Similar Sentiment

Dallas Fed President Lorie Logan also echoed a similar sentiment, stating that she is not fully convinced that inflation is heading to their 2% target. She described the current policy stance as appropriate and that they do not need to make more cuts to achieve their dual mandate goals.

Logan further remarked that more Fed rate cuts will be appropriate if they see inflation coming down, but with further material cooling in the labor market. “But right now, I am more worried about inflation remaining stubbornly high,” she said.

It is worth noting that Logan is also a voting member of the FOMC this year and therefore directly influences rate-cut decisions. However, while both Fed officials have suggested that inflation is the priority for now, recent initial jobless claims and JOLTS job openings suggest the labor market may still be in decline.

As such, the focus will be on the January jobs report that drops tomorrow. Estimates for the nonfarm payrolls are 70,000, while the forecast is that the unemployment rate will come in at 4.4%. Meanwhile, the CPI  inflation report drops this Friday, which would also impact the decision at the March FOMC meeting.