Fed’s Hammack Signals No Rush to Cut Rates as January Hold Odds Near 80%

Cleveland Fed President Beth Hammack has said that there is no urgency to cut interest rates. Her comments come after three straight rate cuts totaling 75 basis points this year. Meanwhile, prediction markets now price nearly an 80% chance the Fed holds rates in January.

Is the Fed Done Cutting Rates Till Spring?

Hammack told the Wall Street Journal she sees no reason to adjust rates at least until spring. Her words indicate that the Federal Reserve officials can be sending a message of patience as January is approaching.

Hammack claimed the risks of inflation were greater than the concerns about the labor market. She observed that new inflation-related figures might be lower than the real price pressures. The price of goods is still high because the effects of tariffs trickle down supply chains.

Hence, she desires a better indication that inflation is dropping towards the Fed’s intended target. The same signal is evident from New York Fed president, John Williams. Williams also claimed that there is no hurry to cut interest rates.

Presently, the Fed policy rate is between 3.5% and 3.75%. According to Hammack, this level is near neutral. Nevertheless, she mentioned that a tighter position would be a good solution to reduce inflation.

Such an opinion makes her one of the more conservative policymakers. Her position is important as she will cast her vote when it comes to policy decisions in the coming year.

January Rate Cut Odds Drop

Federal Open Market Committee members always influence the final decision made at every meeting. Signals from these officials often guide market expectations months ahead.

Officials often want more inflation data before changing course. Employment conditions have softened but remain relatively stable.

Market expectations have shifted in recent weeks as traders reassess the January outlook. Polymarket data reflects this shift clearly. The “no change” outcome has climbed steadily in recent weeks, reaching 79% at the time of writing.

Nevertheless, uncertainty still exists due to the possibility of a change in Fed leadership, such as the possibility of Kevin Hassett becoming the Fed chair. This cautious message is in line with the broader message from the Fed.

A number of officials have cautioned against a rapid cut. They are afraid that relaxing the policy would revive inflation.

What Happens To Markets Because Of Rate Cuts?

Risks are still a key aspect of decision making. For consumers and investors, steady rates imply that the cost of borrowing remains.

In addition, Fed expectations tend to affect crypto and risk assets. Nevertheless, certain contrast still exists as Fed’s Chris Waller highlighted a very weak labor market.

Reduced odds of rate cuts usually diminish short-term speculative interest. However, policy transparency policy can facilitate longer-term positioning. Markets find it easier to stick to predictabilities instead of unpredictable changes.