Cleveland Fed President sees no reason to touch interest rates in coming months

Cleveland Fed President Elizabeth Hammack on Sunday said she sees no reason to move interest rates for months, even after the Fed cut at the last three meetings by a total of 0.75 percentage points.

In an interview with the Wall Street Journal, Beth explained that she is more focused on inflation staying high than on signs that the labor market could soften. She did not vote on policy this year, but she joins the voting group next year, which means what she says now matters a lot.

Beth pointed to the November inflation report that looked better on paper but came with issues. She said the government shutdown in October and the first half of November distorted how prices were measured, which means the 2.7% yearly consumer-price index might actually be closer to 2.9% or 3.0%, the number many forecasters expected.

Beth said she still welcomes the return of official Bureau of Labor Statistics data but is treating it carefully.

Fed holds steady while inflation and tariffs move through the system

Beth said one big reason she does not think rate cuts make sense now is her view of the neutral rate. That is the level that neither speeds nor slows the economy. She said the neutral rate seems higher than most people assume and that the economy looks strong heading into next year.

According to Beth, the Fed might even be sitting a little below that neutral point, which means policy could still be giving the economy a boost. She also said the benchmark rate, currently set between 3.5% and 3.75%, does not need to change until at least spring.

By then, the Fed should know whether the slowdown in goods-price inflation is real, especially as tariffs work their way through supply chains.

She added that business leaders are telling her they expect higher costs in the first quarter. She said they blame tariffs and other input pressures, and that many are planning larger price increases.

Beth said that is a concern with inflation near 3% for roughly 18 months, and that hearing this kind of pricing talk makes her even less eager to consider rate cuts.

This comes amid talks of National Economic Council Director Kevin Hassett and former Fed governor Kevin Warsh possibly becoming the next Fed chair in May 2026.

Investors worry that they each support aggressive rate cuts, which would push inflation back up along with long-dated Treasury yields, especially if markets think rate cuts are happening for the wrong reasons.

Wall Street is already having a rough December, with the S&P 500 and Nasdaq Composite down for the month, a rare pattern for a month that usually posts gains of more than 1% on average. The drop also threatens to break the S&P 500’s seven-month winning streak.

The index is fighting to stay above its 50-day moving average, a point BTIG’s Jonathan Krinsky flagged as a weak sign for risk appetite.

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