Fed’s Hammack Says Pause in Rate Cuts Is Her Base Case for Now

(Bloomberg) — Federal Reserve Bank of Cleveland President Beth Hammack said monetary policy is in a good place to pause and assess the effects of 75 basis points of rate cuts in the economy during the first quarter.

“Where we are today is my base case that we can stay here for some period of time until we get clearer evidence that either inflation is coming back down to target or the employment side is weakening more materially,” Hammack said in an interview for the Wall Street Journal’s Take On the Week podcast conducted Thursday and aired Sunday.

The Fed’s latest interest rate cut on Dec. 10 faced three dissents, the most since 2019. Officials are divided about the appropriate path for rates, with some policymakers more concerned about a cooling labor market and others saying the Fed should prioritize reining in above-target inflation.

Interest-rate projections released after the meeting showed six officials preferred to leave rates unchanged.

“We took 75 basis points off of the policy rate, which should help support that labor side of our mandate, but we do need to be mindful,” said Hammack, who will be a voting member for the Federal Open Market Committee in 2026. “I’m very focused on making sure that we can get inflation back to target. That is one of our primary objectives and it’s important that we complete the job.”

Policymakers received economic data last week that had been delayed by the record-long government shutdown. While the US unemployment rate rose to 4.6% in November from 4.4% in September, the core consumer price index — which excludes volatile food and energy prices — rose 2.6% year-on-year in November, the slowest increase since 2021.

Hammack said she doesn’t put much weight on any single economic report and that the latest inflation data includes “noise” due to the lack of sampling during the shutdown.

“It’s just one number and I want to take some time,” she said. “Fortunately, we have a lot of time before our next meeting to see how the broader picture comes in.”

Hammack said inflation has been stuck near 3% for much of the past year and a half and input costs for businesses are still rising, which could lead to renewed price increases. That reinforces the need for caution, she said.

After the Fed cut rates in December, Hammack said she’d prefer interest rates to be “slightly more restrictive.”

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