• Cleveland Fed President Beth Hammack argues monetary policy remains "barely restrictive" and opposes further interest rate cuts
  • Hammack projects inflation will remain around 3% into 2026, well above the Fed's 2% target
  • Her hawkish stance signals potential divisions within the FOMC ahead of December policy meeting

Cleveland Federal Reserve President Beth Hammack delivered a stark warning that high inflation continues to pose a serious threat to the U.S. economy, taking a firm stance against further interest rate cuts in a speech that rattled financial markets.

Speaking at the Economic Club of New York on Thursday, Hammack argued that current monetary policy remains "barely restrictive, if at all" and expressed strong opposition to the recent rate cut that brought the federal funds rate to the 3.75%-4.00% range. Her comments represent one of the most hawkish positions voiced by a Fed official in recent months and suggest deepening divisions within the Federal Open Market Committee.

"The data simply don't support easing at this juncture," Hammack told the audience, according to people familiar with her prepared remarks. "We're seeing persistent inflationary pressures, particularly in services, that demand continued vigilance."

Hammack projected that inflation will likely remain around 3% into 2026, significantly above the Fed's 2% target. This outlook contrasts with more optimistic assessments from some of her colleagues who have pointed to recent modest improvements in inflation data. The Personal Consumption Expenditures index, the Fed's preferred inflation gauge, stood at 2.7% in August, with core PCE at 2.9%.

The Cleveland Fed president emphasized her preference for a "higher-for-longer" interest rate environment, warning that premature easing could prolong high inflation and encourage excessive risk-taking in financial markets. She noted that while the financial system and household finances remain strong, financial conditions are still "quite accommodative"—a concern shared by several other regional Fed presidents.

Market reaction was immediate, with Treasury yields climbing and rate-sensitive stocks under pressure as traders recalibrated their expectations for future Fed policy. The two-year Treasury yield, which closely tracks monetary policy expectations, jumped 8 basis points following her comments.

Hammack's stance highlights the delicate balancing act facing Fed policymakers as they navigate between competing risks. While some officials worry about overtightening and damaging the labor market, others like Hammack are more concerned about inflation becoming entrenched if policy is loosened too soon.

This tension is likely to come to a head at the December 10th FOMC meeting, where the committee will need to reconcile these divergent views. According to sources close to the discussions, the debate has grown more heated in recent weeks as inflation data has failed to show the consistent improvement many policymakers had anticipated.

The Fed's internal divisions reflect broader global central bank trends, with counterparts in Europe and the UK also resisting calls for aggressive easing amid persistent post-pandemic inflation pressures. Several international central banks have similarly paused their easing cycles in recent months, citing concerns about sticky services inflation and resilient labor markets.

Hammack also flagged potential financial stability risks, specifically mentioning stablecoins and private credit as areas requiring close monitoring. Her comments suggest that beyond inflation concerns, financial market excesses remain a key consideration for Fed officials contemplating further policy adjustments.

Efforts to reach Hammack for additional comment following her speech were unsuccessful. A spokesperson for the Cleveland Fed declined to elaborate beyond the prepared remarks, stating only that the president's comments "speak for themselves."

Correction: An earlier version of this article misstated the timing of Hammack's speech. It occurred on November 6, 2025.