FED: Hammack Sees Strong Case For Keeping Rates On Hold, Contacts Report Slowing

Cleveland Fed’s Hammack (’26 voter, hawk) suggests a strong case for keeping rates on hold, although she does note business contacts reporting a pausing of some spending amidst uncertainty surrounding government policies. This ‘no need to hurry to adjust rates’ rhetoric has been repeated by many FOMC members. 

• She sees a “strong case to hold monetary policy steady in order to balance the risks coming from further elevated inflation and a slowing labor market”.
• “By many measures, the backward-looking data have been encouraging, but heightened uncertainty surrounding government policies is clouding the outlook and raising the risks of higher inflation and slower growth.”
• That said, anecdotal reports from business contacts in her district indicate softer activity: “Many indicate that they have paused some spending in light of increased uncertainty surrounding government policies, including tariffs, immigration, federal spending, and employment”.
• Reiterating comments from last week: “I would rather be slow and move in the right direction than move quickly in the wrong direction.”
• Two-sided risks to rates: "If the economy should falter and inflation decline, then it may be appropriate to ease policy by lowering the federal funds rate from its current level of 4-1/4 to 4-1/2 percent, perhaps even quickly. If the labor market remains healthy and inflation moves up persistently, then monetary policy may need to follow a more restrictive trajectory. But if elevated inflation is paired with a slowing labor market, then monetary policy will face some challenging tradeoffs. In that case, it will be important to ensure inflation expectations remain well anchored while assessing the likely magnitude and persistence of the misses to each side of our dual mandate goals."
• Her prepared remarks in full, here.